The majority of consensus forecasts in ShareData™ are supplied by leading stockbrokers in South Africa. The following stockbroking firms (which research JSE shares) are currently contributors of forecasts:
- Deutsche Securities (Pty) Ltd.
- Investec Property Investments (Pty) Ltd.
- Investec Securities Ltd.
- JPMorgan Equities SA (Pty) Ltd.
- Nedbank Capital (Pty) Ltd.
- Rencap Securities (Pty) Ltd.
- SBG Securities (Pty) Ltd.
- UBS South African (Pty) Ltd.
We calculate a forward price vector based on the best and worst earnings estimates for the company, using either the historical P/E of the share or the sector. It is important to realise that this projection is in no way a prediction of where we or anybody else believes the share price is going. It is simply a calculation which says, “If this earnings estimate comes true, and if the share enjoys this historical P/E, then this is where it will trade”. Both the future earnings of the share and its future rating (or P/E) lie at the heart of the investment decision, and this is where the investor has to take a view.
ShareData Online simply provides an illustration of one possible range of outcomes.
You will notice that the forward price projections are based on either the historical share P/E or the historical index P/E, and over anything from three months to two years. The algorithm used to determine these variables uses the historical P/E of the share provided this is within 200% of the average index P/E. If the share’s P/E is too high, the program uses the index P/E. The rationale for this is that very high ratings are difficult to sustain, and tend, over time, to move back towards the index average.
The Historical P/E Range chart shows the P/E stability for each share over five years based on year-end data.
The highest and lowest P/Es (as calculated by ProfileData) for each of the last five years are extracted from the ShareData™ database. The chart shows the average P/E and the average high and low. This enables you to see the volatility of a company's P/E and the extent to which the P/E range stays within the five year historical averages.
From an interpretative point of view, this chart helps you form an opinion about the reliability of forward price projections – the more stable the historical P/E range, the more likely that forward price projections can be relied upon.