Stock market indices + earnings per share

<body><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td> <font face="garamond, times new roman, times" mstheme> <p> Profits </p> <p> </p> </font mstheme> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="1%"><font face="garamond, times new roman, times" mstheme> <p> </p> </font mstheme></td><td valign="top" width="24"></td><td valign="top"> <p>This page uses frames, but your browser doesn't support them. </p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">Shares: Profits</font></strong></p> <p><strong><em><font face="Arial Narrow" size="2" color="#00FF00">Buy when the coloured lines trend higher, </font><font face="Arial Narrow" size="2" color="#FF0000">sell when they trend lower</font></em></strong></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>This tool is intended to show the influence on share prices of corporate profits. It is designed not only to show the historic relationship but also to provide a best guess as to the future trend. PIT has developed an econometric model to forecast these from the top-down, so as to avoid the widespread tendency for over-optimistic forecasts generated by aggregating bottom-up Earnings per Share forecasts. For comparability, stock market indexes have been rebased to set year-end 1994 at 100, and the Earnings per Share profits series has been rebased to set 1995 at 100. </strong></font></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">In each chart the stock market index is shown as </font><font face="Arial Narrow" size="2" color="#FFFFFF">the thick white line</font><font face="Arial Narrow" size="2" color="#C0C0C0"> on the right hand axis. The main explanatory variable, the index of historic Earnings per Share, shown as</font><font face="Arial Narrow" size="2" color="#FFFF00"> the thin yellow line</font><font face="Arial Narrow" size="2" color="#C0C0C0">,  uses the left hand axis as does the Best Guesses for its future development, shown as </font><font face="Arial Narrow" size="2" color="#FF0000">the thin orange line</font><font face="Arial Narrow" size="2" color="#C0C0C0">.</font></strong></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Both historic data and Best Guesses should be treated as general indications of trend only. As historic data on whole market Earnings Per Share is seldom available, this series has been derived from a variety of sources of historic data. In order to achieve compatibility these have required considerable adjustments. Thus even the historic data should be considered as estimates only.</strong></font></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Best Guesses suggest what would happen to future Earnings per Share based on the PIT econometric model, tested over 15 years of historic data, which utilises consensus estimates for GDP, interest rates, wages and prices. For some countries there is insufficient data to enable us to produce a meaningful econometric model for generating Best Guesses about Earnings Per Share.</strong></font></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>There has been an important shift in the relationship between share prices and company profits over the past quarter century. Given the enormous resources now devoted by the securities industry to forecasting corporate profits, the focus of attention has moved forward from current year profits in the early part of the period to next year's profits in the latter part of the period.</strong></font></p> <p><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>Please note that comparisons between countries are subject to differences in the reporting of corporate profits. In general Earnings Per Share may be over-stated where there is a tradition of profit maximisation and early adoption of full consolidation of subsidiaries, as in Anglo-Saxon countries, and under-stated where the interests of outside shareholders may take second place to tax minimisation. In recent years these differences have begun to diminish.</strong></font></p> <hr color="#FF0000"> <p align="center"><font size="2">[ <a href="global_asset_allocation_sitemap.htm" target="_top">Site Map</a> ] [ <a href="index.htm" target="_top">Home</a> ]<font size="2" face="Arial"><br> </font>[ <a href="Chart_Library.htm" target="_top">Chart Library</a> ] [ </font> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td><font face="garamond, times new roman, times" mstheme> <p align="left"><font face="Arial Narrow" size="1" color="#C0C0C0">Copyright © 1999 Professional Investment Tools Ltd., authorised by the Financial Securities Authority. An Independent Financial Adviser. Please read Financial Health Warning and Licence Agreement. UK laws apply exclusively. Principal sources: Consensus Economics, Corel Corp., FIBV, Global Financial Data, PIT, national governments and stock exchanges. Information and opinions are based on sources believed to be reliable and accurate. However PIT does not guarantee this to be the case, and does not accept liability for any loss arising. This is for information only and does not constitute a solicitation to deal in any securities. Opinions are liable to change. Past performance is no guarantee of future success. Last modified: December 18, 2001</font><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>.</strong></font></p> </font mstheme></td></tr></table></body>