Financial Analysts from banks and research houses cover companies and the evolution of their business. In this process, they issue estimates about the EPS and Sales of a company, and often about other measures as well: dividends, cash flow, ebitda etc.
Through this thorough investigation, analysts release ratings for stocks: buy, hold, and sell. The individual ratings are then aggregated to give people an overall picture of analysts’ ratings on a stock.
A high level of analyst BUY ratings signals a high degree of consensus with regards to future stock price performance. On the other hand, a low level of analyst BUY ratings signals a low level of confidence in the future stock price performance. However, unexpected negative news could lead to a meaningful correction in the price and analysts to review their ratings
The Analyst Revision Bias measures how many analysts have reviewed their estimates up or down in the last month. A reading of +100% means that all analysts have increased their estimates, a reading of -75% means most analysts have decreased them.
Analyst Revisions help gauge consensus and understand whether the research community for this stock actually has predictive power or - as sometimes happens - is more of a contrarian indicator: in some cases, when all analysts are one-sided on the trade, it’s a sign to do the opposite.
Analyst Expected Growth helps gauge the views of the analyst community on the growth potential for the stock.
Discounted cash flows, an absolute valuation method, rely on growth expectations to predict future cash flows and hence potential stock prices. Investors can use analyst expected growth as a benchmark for their own growth expectations.
For example, improving analyst expectations for the company's Earnings Per Share (EPS) outlook can often be incrementally bullish for the stock price. Conversely, less positive analyst expectations for the company's Earnings Per Share (EPS) outlook can often be incrementally bearish for the stock price.