Probability of analyst earnings estimate revisions
factor.formula
Analyst earnings forecast revision probability formula:
in:
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The total number of earnings forecast reports given by analysts for a specific stock in a specific reporting period (usually a fiscal year). To ensure the robustness and effectiveness of the factor, it is recommended to only include analyst reports within the past year, and the $N \geq 3$ condition must be met, otherwise the data for the stock in the current reporting period is considered missing. $N$ represents the breadth of the market's attention to the stock's earnings forecast.
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The number of reports in which the net profit forecast value is lower than the current (usually the most recently released) analyst net profit forecast value among all $N$ analyst forecast reports. This value reflects the number of upward revisions of analyst forecasts. The larger the value, the more analysts have raised their earnings expectations in subsequent reports.
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Among all $N$ analyst forecast reports, the number of reports with net profit forecast values higher than the latest analyst net profit forecast value. This value reflects the number of downward revisions of analyst forecasts. The larger the value, the more analysts have lowered their earnings expectations in subsequent reports.
factor.explanation
The value range of analyst earnings forecast revision probability (FOM) is [-1, 1]. The higher the FOM value, the more optimistic the analyst's earnings expectations for the stock, that is, the higher the probability of an upward revision of the earnings forecast; the lower the FOM value, the more pessimistic the analyst's earnings expectations for the stock, that is, the higher the probability of a downward revision of the earnings forecast. Specifically:
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FOM = 1: means that all analysts' earnings forecasts in the past are lower than the current latest forecast, which means that the market's earnings expectations for the company have been significantly raised and the sentiment is extremely optimistic.
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FOM = -1: means that all analysts' earnings forecasts in the past are higher than the current latest forecast, which means that the market's earnings expectations for the company have been significantly lowered and the sentiment is extremely pessimistic.
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FOM = 0: means that the number of upward and downward revisions of analysts' earnings forecasts in the past is basically the same as that of the current latest forecast, indicating that the market's earnings expectations for the company have not changed significantly.
This factor can reflect the short-term fluctuations in market sentiment and can also be used as a supplement to fundamental analysis to assist in judging the investment value of stocks.