In investing, earnings drive stock prices. The thing is, though, for many higher growth firms, it’s really hard to determine just how likely a firm is to hit its stated targets.
An earnings miss — or even a hint of one – can be disastrous to share prices.
So, investors spend a lot of time listening to this analyst and that pundit explain his expectations for earnings.
The truth is, very few of these guys get it right.
A better way to get earnings estimates: crowdsource ’em
Most of the time we use analyst consensus earnings — an average of all the different Wall Street opinions.
The problem with using an average is that earnings estimates on certain stocks diverge pretty significantly and taking the average isn’t an entirely accurate way of trying to gauge earnings.
There are a couple of ways to do this better/smarter right now.