I thought I would share something I am working at the moment. Everyone who watches the equity markets watches earnings. How much in EPS is company X going earn? Did they make, exceed, or miss earnings? What is the trend in estimates? These are all questions equity investors have asked at some point. I thought it might be fun and interesting to look at the trend in estimates for companies in the S&P 1500 and track the upward and downward move in estimates for the 1500 names over time.
The general theory behind this index is that higher stock prices should be supported by higher earnings while an acceleration in prices should correspond with an acceleration in earning expectations. The chart of the Earning Estimate Diffusion Index tracked against the S&P 500 is shown below.
There does appear to be an upward bias in the trend of all earning estimates (hey, these are sell-side analysts) and the average of the diffusion index is around 65 while the median is about 68. Presently, the diffusion index is at about 68.
The general theory behind this index is that higher stock prices should be supported by higher earnings while an acceleration in prices should correspond with an acceleration in earning expectations. The chart of the Earning Estimate Diffusion Index tracked against the S&P 500 is shown below.
There does appear to be an upward bias in the trend of all earning estimates (hey, these are sell-side analysts) and the average of the diffusion index is around 65 while the median is about 68. Presently, the diffusion index is at about 68.
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