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Ultimately, the most important numbers for fundamental analysis are the EPS estimates. The quarterly and yearly EPS estimates are the life-blood of stock selection business. Personally, the short-term (current quarter and next quarter) together with the longer term yearly estimates form the basis of my investment decisions. Since investor decision-making is based on these estimates, accuracy is of vital importance.

In this article we will review the EPS numbers posted by the Street and by the Helios Q website. How did both parties perform? Were the estimates of any value?

Now that all eleven solars have released the Q3 numbers, we can take a look at the accuracy of solar estimates. Please keep in mind that this is my hobby (a one-man shop) pitted against the multibillion-dollar Street machine which has access to an array of analytical tools and full-time staff to generate the estimates. I guess, in some ways, we are looking at David and Goliath.

The eleven solars discussed in this article:

  • Canadian Solar Inc. (CSIQ)
  • China Sunergy Co., Ltd. (CSUN)
  • Daqo New Energy Corp. (DQ)
  • Hanwha Solarone Co., Ltd. (HSOL)
  • JA Solar Holdings Co., Ltd. (JASO)
  • Jinko Solar Holding Company Limited (JKS)
  • LDK Solar Co. Inc. (LDK)
  • Renesola LTD (SOL)
  • Suntech Power Holdings Co., Ltd. (STP)
  • Trina Solar Limited (TSL)Yingli Green Energy Holding Co. Ltd. (YGE)

The table below summarizes the latest Street estimates, together with our estimates for Q3. These estimates are compared to the actuals posted by the eleven Chinese ADRs.

Third Quarter Estimates Versus the Street Estimates

Our

Street

Actual

Best

Stock

Estimates

Estimates

EPS

Estimate

CSIQ

-0.73

-0.39

-1.02

Helios

CSUN

-0.81

-0.51

-0.78

Helios

DQ

0.45

0.43

0.34

Street

HSOL

-0.02

-0.08

-0.33

Street

JASO

0.11

-0.02

-0.36

Street

JKS

1.07

0.18

-1.86

Street

LDK

-0.78

-0.46

-0.87

Helios

SOL

-0.08

-0.13

-0.09

Helios

STP

-0.21

-0.26

-0.64

Street

TSL

-0.13

0.01

-0.45

Helios

YGE

-0.17

-0.02

-0.18

Helios

Although both parties came close to some of the EPS numbers posted by the companies, there is a lot of room for improvement. Naturally one could argue that this quarter is extreme in changes to important metrics.

My biggest disappointment was with JKS. It revised Q3 guidance but did not mention some of the big-ticket negative news, such as reductions to inventory value and an increase to bad debt accounts.

Over the next week, I will mull over the carnage laid out by the solars this week in their conference calls. The metrics going forward are breathtakingly bad and analyzing the pieces of the puzzle will take a bit of time to digest.

In terms of accuracy, the Helios estimates squeeked out a narrow 6-5 victory over the Street. We won't celebrate yet, as the Street could beat us next time.

The Investing Hobo Estimates

There is another writer on Seeking Alpha who posts EPS estimates for selected solars. After a quick look, for Q3, I believe he posted seven company estimates. Since I took the time to compare to the Street, I may as well compare to a fellow writer.

Third Quarter Estimates Versus the Investing Hobo Estimates

Our

Hobo

Actual

Best

Stock

Estimates

Estimate

EPS

Estimate

CSIQ

-0.73

-0.16

-1.02

Helios

JKS

1.07

0.73

-1.86

Hobo

SOL

-0.08

-0.25

-0.09

Helios

LDK

-0.78

-0.89

-0.87

Hobo

STP

-0.21

-0.14

-0.64

Helios

TSL

-0.13

0.10

-0.45

Helios

YGE

-0.17

-0.22

-0.18

Helios

Overall Performance Accuracy and Batting Average

So in rating performance, we have added a baseball statistic to performance:

Most Accurate

Batting Average

The Street

5

0.455

Investing Hobo

1

0.143

Helios Q

5

0.455

Notes: The batting averages do not add up, as Investing Hobo's batting average was adjusted for seven estimates. We may or may not include one-time items in our estimates. My belief is that, over time, the omission of one-time items should even out. Therefore all estimates should stand on their own.

Summary

This exercise is not in any way to belittle the Street or Investing Hobo. Estimated EPS compared to the actuals point out how difficult it is to post high-quality EPS estimates. I have stated in the past that as we go further out from the current quarter estimates, the chance for greater variations from the actuals could increase greatly and the variations could be magnified by unexpected events.

In poker, the cards speak for themselves. Ultimately for any analyst, the EPS estimates speak for themselves.

It is my hope that over time, our current quarter estimates will improve significantly. Even with better current quarter estimates, full-year EPS estimates will continue to be extremely volatile.

Source: The Street's Track Record For Q3 Chinese Solar Estimates