Equity Analysts Have Been Overoptimistic for a Generation
This is explains why you should kill the company and only invest if it has a margin’s of safety.
Introduction (Via HBR & McKinsey Quarterly)
For the past quarter century, equity analysts’ earnings-growth estimates have been almost 100% too high. Their overoptimistic projections have generally ranged from 10% to 12% annually, compared with actual growth of 6% (excluding the spike in growth from 1998–2001), according to McKinsey research. Only in strong-growth years such as 2003 to 2006 did forecasts hit the mark.