How to do your own EPS and DPS forecasts?

[ubtheboss]

I'm a bit of a newbie and I'm wondering if anyone has a method for forecasting EPS and DPS?

I know there is a bit of crystal ball gazing involved but just wondering....

Thanks!

 

[DaveMac]

Hey ubtheboss,

I know the nine msn shares site has 1 and 2 year forecast EPS and DPS done for you, free.

An example on RIO at the moment.

I do not know how to calculate these figures myself, though.

 

[skc]

All valuation methods are trying to beat the market. Essentially you are wishing that your valuation is for some reason more accurate than the market. You can only do that if you have better information or insight on the particular industry.

IMO this can probably be achieved for small, simple businesses. Take the basic profit equation (Profit = volume x price - costs) and see if you can forecast any of those figures based on historical trends, management growth plans, or if you believe in the management or analysts projections. If the company receives few analyst coverage (due to its size) then there is a chance that you have a more correct view on valuation than the market.

But if you are forecasting EPS for BHP, you are just about forecasting the economic fate of the entire world, and it is unlikely that you will gain an edge on the market imo.

 

[ubtheboss]

My guess- for a company that has no broker forecasts that I can find- was to use an average of % increase/ decreases in NPAT and divs YTY. To fine tune my guess I would examine the annual report and quarterly activities/ cash flow statements for things that are/ might impact my numbers.

Much like you suggest skc. Thanks

DaveMac- that's a good resource. Thanks. Most online brokers (commsec, etrade, etc.) also have those numbers. In fact, Money seems to have the exact numbers commsec has.

If anyone else has a method they want to share please chime in

 

[ubtheboss]

I'm wondering about this while looking at a 2010 annual report:

NPAT = basic EPS x weighted avg. # shares

EqPS = end equity / # of shares on issue

Should the # of shares in the EqPS calculation also be the weighted avg or should it be the total number of shares on issue at the end of the year?