How Do You All Make Revenue Forcasts?

[DesertCat]

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Out of curiosity how do you all make revenue (sales) forcasts for a company that you invest in?

From a another thread these companys were listed as undervalued I beleive:

Altria Group
American Express
Berkshire Hathaway
Bristol-Myers Squibb

In deciding to buy one of these wouldn't one have to have some idea that the revenues for these companys were going to be better than what was forcast by the market and decide that the market was being too pessimistic? In order to determine what the "market" estimates are on revenues wouldn't one have to use the estimate of analysts? Just curious [img]/images/graemlins/smile.gif[/img].

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Typically you would use the last five years of results to extrapolate. You could use anything between 3-10 years of history. To be an "intelligent investor" you wouldn't rely on analysts for estimates. You'd use your own judgement and "common sense", you'd need to know the inner mechanics and assumptions behind any forecast.

The reality is, forecasting this way usually won't give you substantially different results than the analysts in most cases (after all, usually they are doing the same thing). This is especially true with large cap stocks like you listed, they are well covered and researched. It's hard to find obvious discrepencies between price and value at those sizes. The smaller the capitalization, the fewer analysts typically cover a stock, and small enough, no analysts will cover it.

If you look hard enough you can find exceptions, and odd valuations. For example, today you can find decent steel companies trading for as little as a 4 PE. Some analyst, pointing out the risks of steel prices declining, may argue the PE ratio is reasonable. He's in effect, reflecting the market's opinion. It's up to you to use your judgement and analysis to decide if that opinion is warranted or not.