In this screen we have collected a set of data that can be used to help assess the relative strength of Canadian companies connected to the agriculture sector. It lists the stocks of 13 companies in the areas of chemicals and fertilizer, food manufacturing, food distribution and food retailing. Valuations range from $287-million for Premium Brands Holding Corp. to $44.8-billion for Potash Corp. of Saskatchewan.
The information comes from StarMine, a Thomson Reuters service that ranks analysts and gathers earnings estimate data to which it applies proprietary research to detect momentum and other factors.
The first such measurement is called Starmine SmartEstimate, which is a proprietary blend of analysts' estimates that aims to more accurately forecast upcoming results than the consensus estimate. It gives a weighting to each analyst's estimate according to his or her past accuracy. SmartEstimate also gives greater emphasis to the most timely forecasts and less to those that have not been updated for a lengthy period.
Our screen lists the degree of change, up or down, in the SmartEstimate for each company, measured as a percentage of the original forecast. This column gives an idea of which way momentum is going for the stock.
The percentage difference between the SmartEstimate and the consensus estimate of the Street, called the mean, produces another Starmine metric called the Predicted Surprise. When the two differ by a material amount, i.e. 2 per cent or more, the measurement gets the direction of a future surprise correct 70 per cent of the time, according to Tim Gaumer, director of fundamental research at Thomson Reuters.
The third Starmine measurement applied to this screen is the Analyst Revisions Model, or ARM, which is a measure of the change in analyst sentiment ranging between 1 and 100, with 100 representing the highest rank.
The ARM looks at changes in the consensus over multiple time frames and not just for earnings, but also EBITDA and revenue revisions. It also takes into account the Predicted Surprise percentage shift on these various measures. When this score is near the top (100) or bottom (1) of its range, it is highly predictive of future earnings revisions and helps investors anticipate these events, Mr. Gaumer says.
We have organized the screen by the stocks' ARM rankings in descending order. We chose ARM over Predicted Surprise numbers because the latter metric shows only moderate scores for our agriculture-related companies while the ARM figures show a wide range. Potash Corp. scores very close to 100 and both Canada Bread Co. and Loblaw Companies Ltd. rank at the bottom with 18.
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