While trying to compile an “evaluation template” for the board to use I found myself encouraging readers to look at the estimates posted on Yahoo as a way of judging what the “experts” think will happen. I even contemplated adding those to your real numbers on charts as a way to visualize the possible earnings curve AND then seeing where the real numbers fell in comparison. I also recall that we mostly disregard earnings estimates, and rightly so.
BUT…I wanted to relay a fascinating “fact” that I have seen and heard proven out several times (e.g NatGeo Brain Games tv show and Freakonomics podcast).
So it goes like this, whether you have a crowd guessing how many jelly beans are in a jar or how much the cow weighs at the county fair, the crowd average is usually very accurate. If there are 500 jelly beans, some fool will guess 100 and some fool will guess 1000, but most will not be crazy off. But time after time, the average of all those guesses is really, really close. (you need at least 20)
So, don’t totally ignore analysts estimates, just don’t trade on them.
Oh, but many of our early discoveries may not have many analysts and by the time they do, there is no more hidden value and we sell
(kids are bad because once the first kid takes a guess, all the other kids crowd around her or him with their guesses)