It has been a record-breaking year for the stock market.
On Nov. 14, the S&P/TSX Composite Index closed above 25,000 for the first time.
Helping lift the TSX Index are analysts’ upward revisions to their target prices this earnings season. Approximately 65 per cent of stocks in the S&P/TSX Composite Index have seen their average target prices rise over the past two months, and roughly one out of five stocks in the index have realized upward revisions to their average target prices by 10 per cent or higher. In contrast, only three per cent of stocks in the Index saw their average target prices decline by 10 per cent or more.
Now, here’s a look at analysts’ current target prices, recommendations, forecast returns and yields for securities in the S&P/TSX Composite Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. For the yield provided, Bloomberg calculates this figure by annualizing the most recent announced dividend or distribution value.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
Click here to download an Excel version of the report.
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