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Listed companies with deficits in forecast quality

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Listed companies with deficits in forecast quality

16 Jan, 2019 | News, Press release, Pressemitteilung

  • Glasses manufacturer Fielmann with best forecast for 2017 across all indices
  • Overall improvement in forecast quality; still room for improvement
  • Study examines reporting by all index companies in Germany and expands extensive database on forecast quality

Wiesbaden, January 16, 2019 cometis AG, one of the leading investor relations agencies, has examined the forecast quality of all DAX, MDAX, SDAX and TecDAX companies for the years 2013 to 2017. The study evaluates the business development forecasts on the basis of three criteria: It is not only decisive to what extent the forecast was ultimately met, but also what type of forecast was selected and whether it was adjusted during the year.

Media companies and retailers with the best forecasts
The results of the analysis show that larger companies from the DAX and MDAX are more likely to meet their guidance than companies from the SDAX and TecDAX. In particular, companies from the media and the retail sectors have realistically assessed the future development of their own companies in the Annual Report 2016. By contrast, issuers from the banking, basic resources and technology sectors fell behind. The MDAX-listed glasses manufacturer Fielmann performed best across all indices. The forecast was met almost to the point and not adjusted during the financial year. The worst performer was the MDAX company Steinhoff Holding, which only provided a qualitative estimate for the financial year 2017. In the DAX, the chemicals and pharmaceuticals group Merck gave the most accurate forecast. Commerzbank came in last due to a clear breach of the target value.

10% of forecasts are inaccurate
The overall development over the past four years has shown an improvement in the quality of forecasts. In total, almost two thirds of the companies have issued a point forecast (e.g. “We expect sales of EUR 150 million for the 2017 financial year”) or a quantitative interval forecast (e.g. “We expect sales of between EUR 145 and EUR 155 million for the 2017 financial year”). Nevertheless, every tenth company still chose an inaccurate form of forecast. These include purely comparative forecasts (e.g. “We expect sales to rise for fiscal 2017″) and qualitative forecasts (e.g. ” We expect sales to be satisfactory in fiscal 2017 “). In addition, there was a significant increase in forecast adjustments compared with the 2016 financial year. However, in 80% of the cases these were increases.
The analysis of the key figures showed that more than four fifths of the companies now forecast revenue. The earnings figures present a mixed picture, but, as in previous years, most companies chose EBIT (17%), EBITDA (15%) or the EBIT margin (11%) as the forecast earnings figure.

Forecast quality with potential for improvement
Forecasts of the expected financial performance of a company are an important means for financial players to assess the future outlook of a company. Meaningful quantitative estimates for key performance indicators such as revenue and profitability are preferred. A concrete and accurate forecast strengthens credibility on the capital market. Adjustments to forecasts, on the contrary, can result in substantial losses for the company’s shares.
“Even if the accuracy of forecasts of the index companies has improved overall, there is still room for improvement. There are many good examples. Unfortunately, however, some companies continue to gamble away valuable trust on the capital market with poor forecasts,” comments Henryk Deter, CEO of cometis AG. He continues: “Forecasting as the high art of capital market communication will become increasingly difficult in the coming years due to greater political and economic uncertainty. It is therefore crucial for companies to deal even more intensively with the issue of guidance and improve the forecast quality in the upcoming annual reporting season.
For many years, cometis AG has been supporting listed companies in communicating their forecasts and making practical recommendations for improvement based on the comprehensive data material. It has been shown that the risks of increased volatility can be significantly minimized and at the same time the requirements of investors can be met.

All indicesFielmann AG
High forecast accuracy (deviation less than 0.6 %)
Steinhoff International Holding
Only qualitative forecast of revenue
High forecast accuracy (deviation less than 0.9 %)
Strong deviation from the forecast (almost 40%)
MDAXFielmann AG
High forecast accuracy (deviation less than 0.6 %)
Steinhoff International Holding
Only qualitative forecast of revenue
SDAXScout 24
No forecast adjustments during the year
Rocket Internet
Only a comparative forecast of the result figure
Quantitative interval forecast
Strong deviation from revenue forecast (more than 60%)
Info Box: Forecast Methods
Point forecasts (permissible)“We expect revenue of € 150 million for the 2017 financial year”.
Interval forecasts (permissible)“We expect revenue of between € 145 and € 155 million for the 2017 financial year”
Qualified-comparative forecast (permissible)“We expect a significant increase in revenue for the 2017 financial year”
Comparative forecasts (inadmissible)“We expect increasing revenue for the 2017 financial year”
Qualitative forecast (not permissible)“We expect satisfactory revenue for the 2017 financial year”