I'm worried about my retirement, so I started investing in stocks DAY 48 [How to read the Stock Scouter: Company 'personality' and PER trends]
― Walking with Haru, Investment Record at Age 60, Day 48 ―
Seeing a company's personality behind the numbers
I watched one video today as well.
The theme was 'Utilizing the Stock Scouter (Part 2)'
Yesterday, I learned what can be seen with the Stock Scouter.
Today was the continuation of that.
I learned how to read the numbers.
Even when looking at the same table, there are people who can read it and those who cannot.
Today was the day to bridge that gap.
📍 Current location on the roadmap
What is the Stock Scouter (DAY 47) → How to read the Stock Scouter (Today) → Predicting EPS → Thinking about future PER
📚 What I learned today: Reading a company with the Stock Scouter
① You can understand a 'company's personality' through earnings forecast revisions
The Stock Scouter has a table where you can see a list of forecasts issued by a company in the past and their subsequent revision history.
For example, suppose Company A issues a forecast that 'sales for this term will be 6.4 billion yen'.
After that, they may upwardly or downwardly revise the forecast during the term. This is called an 'earnings forecast revision'.
By looking at this revision history, you can understand the 'personality' of the company.
Companies with many revisions → Forecasts are loose, outlook is unstable
Companies with almost no revisions → Issue conservative forecasts and steadily clear them
For investors, the latter is more reliable.
In the example of the company introduced during the lecture, there were almost no past forecast revisions, and they consistently cleared their forecasts every time. It is easier to trust the future forecasts of such companies.
⭐️ Point
The history of forecast revisions serves as material to measure a company's integrity and prediction accuracy.
I want to choose companies that have few revisions and steadily clear them.
② Trend graph of forecasted PER
The Stock Scouter also displays a graph showing the historical trend of forecasted PER.
This is extremely useful when thinking about future PER.
Why?
To calculate future stock prices, you need future PER. But no one knows what the future PER will be.
That is precisely why it is important to look at past PER movements to get a sense of the range in which this company's PER typically fluctuates.
⭐️ Point
By looking at past PER trends, you can improve the accuracy of your future PER forecasts.
③ Why PER drops immediately after earnings announcements
This part was a bit difficult, but it is an important topic.
I want you to recall the PER calculation formula.
PER = Stock Price ÷ EPS
When the full-year financial results are announced, the forecasted EPS for the next period is newly released.
If it is a company whose performance is growing steadily, the new forecasted EPS will be higher than the previous period.
When EPS increases, the result of the division (PER) decreases. In other words, even if the stock price does not change, the PER temporarily drops.
But what happens after that?
If investors recognize that 'this company's PER is usually around this level,' the PER will try to return to its original level.
The fact that the PER returns to its original level means that the stock price rises by the amount that the EPS increased.
This is the mechanism by which the stock price of a company with growing profits rises.
⭐️ Point
When EPS rises due to an earnings announcement, PER temporarily drops.
However, the stock price rises in the process of returning to its original level.
This is the mechanism of stock price appreciation that we aim for in fundamental analysis.
💬 Satsuki's questions and Haru's answers
🌸 Me: 'Haru-san, does that mean companies with fewer earnings forecast revisions are more reliable?'
🌱 'That's right. Companies that issue conservative forecasts and consistently meet them every time are easier to trust with future forecasts. Conversely, companies with many revisions may have low forecast accuracy or might even be manipulating the numbers intentionally.'
― Haru
🌸 Me: 'So, when EPS rises during earnings, the PER drops, and then the stock price rises when it returns to normal. Are we buying with the goal of catching that?'
🌱 'Exactly. You find a company with continuously growing EPS and buy in before the earnings report. As the PER returns to its original level, the stock price follows. That is the basic strategy of fundamental analysis.'
― Haru
I thought, 'I see.'
I feel like I'm finally starting to see the reason why stock prices rise.
It's not about reading chart movements, but reading the growth of a company's profits.
That is fundamental analysis.
📝 Today's summary
You can understand a company's personality through its history of forecast revisions.
By looking at past PER trends, it becomes easier to predict future PER.
The stock price follows the growth in EPS.
That is the stock price increase we aim for in fundamental analysis.
I watched the video, took notes, and summarized them into an article.
A total of one hour.
One hour every day. That's all it takes.
I believe that continuing is my greatest talent.
Next time, I'll be 'predicting EPS'.
I'll learn how to think about future profits on my own.
I'll continue tomorrow, too.
📣 'Friends walking with Haru' is currently in preparation
I'm creating a place where friends who have also started investing
can report their progress and support each other in continuing.
If you would like to participate, please let me know in the comments🌸
📚 Click here for the related article for DAY 48
#FundamentalAnalysis #StockScouter #PER #EPS #InvestmentBeginner #InvestingInYour60s #RetirementAnxiety #StartedWithAI #WorkingTogetherWithHaru
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