I have enquired as to why the Commsec website is showing what can only be described as bogus EPS forecasts for PME. The EPS forecasts are given in figures and are also on prominent display as a bar graph and are attributed to Morningstar.
2019 22.0c (underlying)
2020 23.7c
2021 21.9c
These indicate a flat earnings trend, which would be a disaster for the stock.Also shown on the website is a rating from Morningstar, which in contrast to the dire picture painted by the EPS forecasts, indicates that PME is fairly valued at $28.30. Clearly, a fair value rating at a price that is equivalent to a PE of about 127, is incompatible with their flat EPS trend.
A high PE growth stock such as PME needs the prospect of EPS growth to justify it high price.
Elsewhere on the CommSec site, the assessment by Goldman Sachs is available.
Goldman are forecasting rising earnings for the stock, which does support something like the current share price.Based on the reported statutory EPS of 18.2c, the figure for 2021 below translates to a forecast 2-year EPS growth rate of 36.6% PA.
2020 27c
2021 34c
2022 41c
I my opinion there is nothing in the history or the publicly disclosed information that would justify the flat Morningstar EPS growth forecast.I asked CommSec about the flat EPS forecasts and the obvious inconsistency with Morningstar’s own benign rating for the stock.
The response was, we know nothing. You will have to take it up with Morningstar, which I did.
So, I finished up getting a phone call from a Morningstar person in Mumbai.He gave me to understand that the data on the CommSec site comes from Morningstar USA rather than Morningstar’s Australian operation. He also pointed out that it is labelled “quantitative”, which apparently is code for the fact that it is produced by a computer algorithm without any human oversight or vetting.
Up until a few months ago, and indeed for at least a decade before that, the EPS forecasts on the CommSec site were forecasts from actual warm-blooded analysts. Where more than one forecast was available, CommSec showed the median and the range and listed the analysist organisations.As part of the recent changes to the website, it appears that CommSec have now abandoned that in favour of displaying what can only be characterised as some kind of robocrap from Morningstar. CommSec should provide a prominent warning that their EPS forecasts aint what they used to be.
Judging from the discussion with the guy in Mumbai, there is no power on earth that can question or alter the output of the computer that disgorges the robocrap.
At one level the promulgation of misleading information about a stock is very disappointing, but I suppose that if you know about it, you can use it to advantage.
Cheers
(20min delay)