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Analysts confounded: where next for profits?

Investors must look beyond the assumptions made in previous earnings forecasts.
Analysts confounded: where next for profits?

With no end in sight to the coronavirus disruption and the FCA putting a break on company reporting season, we will have to wait to see further changes in guidance from brokers, who are finding it nigh on impossible to forecast companies’ future profits growth.

  • Our momentum screen looks at share price growth, forecast earnings growth, and earnings upgrade momentum, so unsurprisingly there are thin pickings this month. There are still some interesting ideas emerging, however, although extra caution is required under the circumstances.
  • Earnings forecast data is in a state of flux right now, and investors should pay attention to other factors – particularly whether a company has a positive net cash position; how easily it covers its fixed costs and whether previous growth estimates were from a low base. If profit margins were low to begin with, then the business is more vulnerable if the present turmoil has longer to run.
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