LONDON -- It's always worth keeping an eye on the earnings forecasts for your favorite companies, especially if you use forward P/E ratios to gauge when to buy and sell your shares.
You never know -- if City brokers have been revising their projections of late, your investments may not be as cheap -- or expensive -- as you think!
Today I am looking at the earnings per share (EPS) forecasts for Aviva (LSE: AV.L)(NYSE: AV), the FTSE 100 insurance company. All my figures are courtesy of S&P Capital IQ.
The consensus for 2012 is for earnings per share of 46 pence, which puts the 327 pence shares on a modest forward P/E of 7.1.
However, the estimates suggest earnings may rise to 51 pence for 2012 and continue to rise to 54 pence for 2014.
Earnings may then progress to 63 pence per share for 2015 and advance to 71 pence for 2016, at least according to City analysts.
The data from S&P Capita IQ also indicates that Aviva's revenues may only improve slightly from 13.6 billion pounds in 2012 to 14.2 billion pounds by 2014. EBITDA could rise around 20%, from 2 billion pounds to 2.4 billion pounds, too.
All told, the forecasts don't look too bad for Aviva, with earnings creeping up slowly between 2012 and 2016. However, that P/E of 7.1 looks like the market is expecting a long, hard slog.
Whether these projections make Aviva a buy, a hold, or a sell is, of course, up to you. To put the company's multiple into perspective, the FTSE 100 at 5,805 trades on a P/E of around 11.
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