Analyst Expectations Stocks continue to grind higher, climbing the “wall of worry.”
Year-to-date, the S&P/TSX Composite Index has rallied a respectable 15 per cent with 10 of the 11 sectors reporting gains. The lone exception being the materials sector with precious metals stocks under pressure.
Also impressive is the breadth with 59 per cent of stocks delivering year-to-date price gainsof 10 per cent or higher (not including yields). Even more impressive is that 37 per cent of stocks in the Index have reported year-to-date price returns exceeding 20 per cent.
The S&P/TSX Composite Index is only 1 per cent away from its record closing high of 20,300 reached on July 6.
Despite the strong rally in the stock market, the TSX is only trading at a slight premium to its historical average. According to Bloomberg, the index is currently trading at a price-to-earnings (P/E) multiple of 15.3 times the 2022 consensus estimate, which is slightly above its 10-year historical average multiple of 14.2 times.
In order to keep the positive price momentum going for stocks, investors will be looking for strong earnings results and guidance when companies report their quarterly results. The earnings season kicks off in earnest next week with 20 per cent of the stocks in the S&P/TSX Composite Index releasing their financial results.
To see what analysts are forecasting ahead of the reported quarterly earnings results, listed below are analysts’ target prices, recommendations, and forecast returns for all 231 securities in the S&P/TSX Composite Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflect an expected share or unit price 12 months from now based on an analyst’s financial modelling such as a discounted cash flow model or sum-of-the-parts model.
Once companies report their financial results in the weeks ahead, earnings expectations, multiples, and target prices could be adjusted meaningfully depending on the reported earnings and management’s outlook (if provided).
It’s important to note that high target prices which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
Ratings (Buys/Holds/Sells)
+ Consensus Target
ECN = 10/0/0
$10.65
Note: My guess is that the target is not reflecting the most recent upgrades.