Genovest has been getting a lot of upgrades behind the scenes lately. Just the other week we launched a bunch of new technical indicators, and now we have earnings estimates! I'm very excited to announce this feature, since it's another long-term goal we've had. Let's see what's new!
If you already know how Genovest works, here's all you need to know to take your stock analysis to the next level. The new indicators are:
forwardpeg(1)PEG ratio using estimated earnings
analysts(1)the number of analysts covering the stock
peg(1)PEG ratio using already reported earnings
Forward P/E and Forward PEG are both calculated using Forward EPS, which is the average of all earnings estimates that look ahead to the next fiscal year. This means the estimates will be projecting earnings reports at most 1 year in the future.
Of course, you can use a different number in the parentheses, like
forwardeps(60) for the Forward EPS as of 60 trading days ago, just like all our other metrics.
Typically several analysis will cover a single stock, and the "official" earnings estimate is simply the average of each individual analyst's estimate.
analysts(1) tells you how many analysts were covering a stock, so you can set thresholds to make sure there are enough analysts covering a stock before you trust an estimate. More analysts typically leads to a better estimate, because you're not trusting just one or two people's judgment. For example, use
analysts(1) >= 3 to make sure there are at least 3 analysts covering a stock.
If there are no analysts covering a stock, its
forwardeps(1) will be 0. This is done intentionally, so that thresholds work intuitively. For example,
forwardeps(1) > 5 will not let stocks through that have no analysts covering it. At Genovest, we like to call this "self selecting." Just be careful when comparing to other metrics, however. For example, I'd recommend pairing
forwardeps(1) > eps(1) with
analysts(1) > 0 for safety.
A few notes about naming
You'll notice a nice parity between P/E and Forward P/E, EPS and Forward EPS, and PEG and Forward PEG. When a metric uses forward-looking estimated earnings instead of already reported earnings, we put "forward" in front of the metric. We hope this is intuitive, and makes it easy to discover these new metrics.
We also included PEG in this bundle of metrics, because it is a useful fundamental indicator, and is very much related to earnings. The Motley Fool popularized the use of the PEG ratio, and according to their definition is supposed to use estimated earnings in the calculation. However, this can be confusing when other definitions use already reported earnings in their PEG ratio calculation. Make no mistake, in Genovest,
peg(1) uses already reported earnings, and
forwardpeg(1) uses earnings estimates, just like the names imply.
Hopefully you find these new metrics useful, and create more profitable trading strategies with them. We are quite excited to start using them for ourselves, and to test whether or not all the advice we hear about earnings estimates is really worth listening to! Try these out in the Backtester to see for yourself. I know I will.