Profit Forecast

Prediction of future levels of profitability by analysts following a company, as well as company officials. Investors base their buy and sell decisions on such earnings projections. Stock prices typically reflect analysts' profit expectations-companies expected to produce rapidly growing profits often have high price/earnings ratios. Conversely, projections of meager earnings result in lower P/E ratios. The company will often guide analysts so that their profit forecasts are not too high or too low, preventing unwelcome surprises. Analyst profit forecasts are tracked by the Institutional Brokers Estimate System (I/B/E/S) and Zacks Estimate System.