Analyst screening filters in ChartMill

Recently, all fundamental ratios that can be used for screening were divided into 5 separate tabs (dividend, growth, valuation, profitability and health). This makes the various filtering options easier to distinguish. We took the opportunity to do the same for all the information coming from analysts.

In this article we will discuss the information you can find under the analysts tab and how you can use these filters when screening stocks.



You can find all available 'analyst filters' on the 'analysts' tab on the stock screener page.

The available filters

Analyst ratings

Here you can consult the buy consensus. The higher the percentage the more analysts are convinced the stock is buy-worthy. In the lower part of this menu you can also set the minimum number of analysts to monitor the stock. If enough analysts follow the stock, the consensus of their advice becomes more reliable.

Analyst price target

This tab allows screening for the difference between the price analysts expect and the current price. You can use the filter to look for undervalued (below target) or overvalued (above target) stocks. Keep in mind that this filter alone is insufficient to judge whether or not a stock is priced correctly. But it can be a confirmation if you had come to the same conclusion of over- or undervaluation based on your own research.

EPS surprise (last 2 and last 4)

An earnings surprise occurs when a company's reported quarterly or annual earnings are above or below analysts' expectations.

With this filter you can specify in how many of the last two or four published quarterly results there has been an earnings surprise, either positive or negative. You can further specify what the average surprise should have been. Also, you can enter a minimum and maximum surprise.

For example, if you are looking for companies that have reported earnings at least three times during the last four quarterly updates that were at least 10% higher than what analysts expected, use the following filters:

• EPS (4): at least 3 beat
• EPS (4): minimum surprise above 10%
  
  

Revenue surprise (last 2 and last 4)

Just like surprises in terms of earnings, there can also be a surprise in revenue, when it turns out to be a lot higher or lower than what was expected in advance. The filter settings for revenue surprise are similar to those for EPS surprise.

You can use the EPS surprise or revenue suprise filters separately, but by using them together you often get a more robust result. Suppose that earnings came out higher than expected, without there being a simultaneous increase in sales, this will mainly be due to cost reductions. This is not a bad thing and a company that learns to use its resources more efficiently will be able to increase its profit percentage considerably. But you can't keep doing that, at least not if you don't want to compromise on the quality of the product or service you offer. On the other hand, all that glitters is not gold just because the turnover has risen sharply. It is perfectly possible that there was a considerable increase in turnover but, in order to achieve that, a lot of extra employees had to be hired so that, percentage-wise, the costs increased more than the turnover and the final profit decreased.

By combining both filters, you can be sure that as far as the results are concerned, the profit surprise was accompanied by a turnover surprise anyway.

Price target revision (1m and 3m)

Revisions of predetermined price targets by analysts are important because they do not simply appear out of thin air. Especially when it comes to a positive revision, the analyst in question will have to have serious elements or indications before deciding on such a revision. After all, an upward price revision implies an even higher price target than what was predicted up to that point.

In ChartMill, these are available over a period of 1 or 3 months. The revised target can be set from -100 to +100%.

EPS next quarter/next year revision (1m and 3m)

When analysts have new information such as higher-than-expected sales of a new product or an improvement in general economic conditions, they may revise their earnings forecasts for the company by adjusting them upward. The adjustment may as well be adjusted downward if the company's performance is expected to be lower than previously assumed.The filter is available for both the revision for the next quarterly or annual result taking into account either the revisions for the past month or for the past three months.

Revenue next quarter/next year revision (1m and 3m)

Revisions for revenue can be set in the same way as revisions for earnings.

Conclusion

Filters related to analyst expectations may be less well known but certainly no less valuable. Upward revisions in particular should be watched closely because analysts tend to be more cautious in nature. These filters are particularly useful if you have already made a first selection based on the more familiar fundamental and technical filter options.

Important: Analyst expectations offer absolutely no guarantee of success. Ultimately, they remain estimates based on the data currently available. Still, their insights can be valuable. After all, analists follow the company closely and will usually have accurate information faster. Due to the nature of their job, they usually have access to contacts and information that you have much less of as an individual investor. In general, independent analysts will be fairly cautious in their predictions. After all, a company posting slightly better results than what the analyst predicted is not a big deal, especially if the analyst had predicted a good result anyway. The perception that an analyst was wrong is stronger if the company performs below expectations.