analyst coverage question

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1

Three weeks ago Radiant Logistics (RLGT) had three analysts covering it; now it has none. How does that work? Does anyone have any idea why coverage would have suddenly stopped? Or is this a data-related issue? Marketwatch still shows three analysts covering it . . . Thanks, - Yuval

2

There are two things to know here: First, when we report the number of analysts, it’s coupled to a particular period. That is, we’ll tell you how many analysts have offered an opinion on the current fiscal year, and then a separate number for the current quarter. Those numbers may or may not match each other or any external site.

Also, we were surprised to learn that the number-of-analysts figure can be quite volatile. I have two guesses for why this is, based on my knowledge of how the sausage is made (both for data collection and stock analysis).

First, there may be a period between when next quarter becomes current quarter and between when next fiscal year becomes current fiscal year. I know that analysts usually publish notes quickly, but it probably varies a bit over whether they just toss off a quick “raised the next quarter – now the current quarter – by $0.01” or “here’s the dump of my previously prepared spreadsheet, where I have updated current and next quarter and years; stay tuned for a text explanation to follow”. S&P may well be waiting for a more formal report before updating the database following an earnings report. Radiant is relatively small and it just announced earnings a couple of weeks ago, so it might be in this category.

Second, there is a fair amount of mobility of analysts between firms. S&P probably has no choice but to say that they lost an analyst when Jane Doe leaves Big, Large and Wealthy Firm and then add an analyst when Ms. Doe joins Firm of Largeness, Bigness and Wealth the next week. No idea if this is affecting the Radiant analysts, but it might be.

But, and this is worth emphasizing, we get the estimate figures wholly formed from S&P. We have no way to examine the components of those figures and make different calls than what we’re getting, so we’re just stuck with the numbers.

Hey, try this:

(IsNA(#AnalystsCurQ,0)+IsNA(FHist("#AnalystsCurQ",1),0)+IsNA(FHist("#AnalystsCurQ",2),0)+IsNA(FHist("#AnalystsCurQ",3),0))/4

That’s an average of the number of analysts for the current quarter over the last four weeks, replacing NAs with zeroes. It should be much less volatile.

I would point out, though, that Radiant Logic’s result for that is 1.75, with three analysts two and three weeks ago, an NA currently, and one analyst last week.

3

Paul -

This answer is great–it’s precisely the kind of care and honesty I’ve come to expect from P123.

The reason it matters so much to me is that I use analyst estimates a lot–both current fiscal year and current quarter, both of sales and EPS. I also use conditional nodes. So when the analysts disappeared all of a sudden my numbers for projected EPS growth and forward P/E changed drastically to reflect TTM values instead of estimates, my sentiment indicator (based on P123’s basic sentiment ranking) went to N/A, and the stock dropped about 200 positions in my ranking.

  • Yuval
4

This is a concern of mine. The analyst community has been reduced dramatically over the past several years as investment banks have reassessed the value of covering a company, especially in the small cap space. I can speak to this personally as I ran the trading desk for a top ten bank until they shut down our equity capital markets division last year. 101 people let go with 25 of those being analysts covering 350 to 400 small and mid cap stocks - RLGT being one of them. I would guess that maybe 1/3 of those analysts landed equity research jobs. For the investment banks to monetize the research, they need to leverage the other aspects of the platform like investment banking and sales and trading. In this low rate, low trading volume environment, those other “levers” like banking and trading are not able to support the research effort and thus the cuts come.

5

Now one of the analysts has come back and CurQEpsMean and CurFYEPSMean are no longer NA. Maybe the other two analysts will reappear soon too.

At any rate, can P123 please default to last week’s estimates when these and similar fields are N/A?

6

Does Eval(CurrQEPSMean = NA, CurrQEPS1WKAgo, CurrQEPSMean) work to achieve this?

Seems to run on my trial.

-Jim

7

I would be highly resistant to that idea. This is one of those situations where the NA means something: There was a change in coverage or estimates that was so radical that it demands attention. In this case, I would rather err on the side of presenting the most timely information that we have.