Stock analysts are just about as likely to be right with their forecasts as economists, meteorologists, or fortune-tellers. While predicting the weather might not be any more accurate, at least it's got some basis in science. All the others are about as accurate as letting monkeys throw darts, or flipping a coin.
Before the advent of Regulation FD, analysts were far more optimistic in their opinions. Today, they tend to think companies will underperform more than they actually do. State Street Global Advisors says that's because companies are "more explicit" in their guidance, hoping to minimize share-price volatility.
A guide to the future
If that's the case, let's use the information that companies provide to our advantage. When they announce earnings, they also often update guidance for the coming quarter and year. While these reports aren't 100% accurate, investors presume that a company knows its business better than anyone else. We can reasonably expect that its estimates will be better than most in predicting its own future.
With the help of the Motley Fool CAPS investor-intelligence database, we can tap the collective stock-picking prowess of more than 105,000 professional and novice investors. We'll look at companies that have recently guided higher, then pair that information with the collective intelligence of CAPS, to see whether these stocks truly have the best chance to outperform the market.
Here are five companies that have recently guided higher, coupled with CAPS investors' opinions of them:
|
Company
|
Period
|
Analyst Est./Previous Guidance
|
Updated Guidance
|
CAPS Rating (5 max)
|
|
American Express (NYSE: AXP )
|
FY2008
|
$3.31
|
$3.51-$3.61
|
***
|
|
Big Lots (NYSE: BIG )
|
FY2009
|
$1.78
|
$1.80-$1.90
|
**
|
|
China Finance Online (Nasdaq: JRJC )
|
Q2 2008
|
$0.15
|
$0.24-$0.26
|
**
|
|
Genesco (NYSE: GCO )
|
FY2009
|
$1.89
|
$2.09-$2.19
|
**
|
|
NCI Building Systems (NYSE: NCS )
|
FY2008
|
$2.92
|
$3.19-$3.44
|
**
|
Source: Briefing.com; Motley Fool CAPS.
These companies show signs of growing their business, and they're followed by both analysts and the CAPS community, though they're not extremely well-liked by the latter. However, please note that this isn't a list of stocks to buy or sell -- just a list of suggestions for further research. In that vein, let's take a closer look at one of them.
Nostrovia!
Financial services seem to be a nascent industry in China. Although the Shanghai index has been around since 1990, only more recently has the proletariat there caught the investing bug. And as more Chinese companies list on U.S. exchanges, the need for greater analysis of these companies grows.
That's where China Finance Online comes in. It sells online financial services analyzing financial and listed company information in China. With China's stock market and economy booming in recent years, CFO has enjoyed a fair amount of success. Whether or not it will weather its own high valuation, the current downturn in the Chinese index, and investors' subsequent hesitancy to invest, remains to be seen. Yet that hasn't stopped the company from raising guidance in both this quarter and last quarter.
Investors are still willing to bank on future growth. As CAPS player malboeuf notes, the financials seem solid enough, and a deal with China Telecom (NYSE: CHA ) to launch a personal finance portal ought to call up some decent prospects: "Decent cash flow, very little debt, impressive deferred revenues averageing out to about 9 million a quarter. The recent deal with [China Telecom] in January will only help as they expand their telemarketing force."
Guide on!
Yet we want to know what's your opinion on China Finance Online. Your input can help guide other investors to stocks with bright prospects for growth. Head on over to Motley Fool CAPS and let your voice lead the way.
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