Consistent Earnings-Price Ratio
factor.formula
The calculation of consensus expected earnings per share (EPS) usually involves the following steps: first, collect the earnings per share forecasts of multiple institutional analysts for a specific company in future years (usually the next 12 months); then, according to different weighting methods (such as arithmetic mean, double weighting of time and institution, weighting of forecast accuracy, etc.), these forecast values are weighted averaged to obtain the consensus expected EPS; finally, divide the consensus expected EPS by the current market price of the stock to obtain the inverse of the analysts' consensus expected price-to-earnings ratio.
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Analyst consensus earnings per share, obtained by taking a weighted average of multiple institutional analysts' forecasts of earnings per share for future years.
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The current market price of the stock
factor.explanation
This factor constructs an indicator to measure the relative value of stocks through the consensus expectations of analysts on the company's future profitability and combines it with the current market price. A higher E/P ratio usually indicates a relatively low valuation, which may mean that the stock is undervalued; conversely, a lower E/P ratio may indicate a relatively high valuation, which may mean that the stock is overvalued. It should be noted that the consensus expected EPS calculation method used by different data providers may be slightly different, and the specific algorithm should be carefully examined when actually used.