Ask Colin

There are many sites where they forecast the EPS Growth. One site has an ASX overall Top 10 forecast EPS Growth as at 06/01/06 (EPS Growth (%) F/Year), ranging from GLB 4900% down to HDR 120%. What are your thoughts on these types of forecasts?
I know nothing about how these forecasts are generated, but it sounds to me as though they may have some automated system that is based on a formula. Then again, it may be that they are analysts' forecasts - maybe the consensus of the published analysts' forecasts. My attitude to this is that it is like crystal ball gazing. Analysts and everyone else for that matter have a very poor record in predicting the future. Even companies have trouble getting their own forecasts right. Personally, I put no weight on forecasts whatsoever. My philosophy is to follow Benjamin Graham on this issue and rely only on the past results as an indicator of the safety level. The problem is that new companies have no past results. I also follow Graham on these - they are speculations and best avoided. Even if you are an insider and have special knowledge of a company, be careful you don't believe your own pipedreams.

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