Country Estimates: Revisions Ratio

One important driver of stock prices is changing expectations.  One measure of changing expectations is the ratio of upward and downward earnings estimate revisions by analysts — the “Revisions Ratio”.

Thomson One Analytics provides aggregate individual country level P/E, Earnings Growth and Revisions Ratios for the prior year, current year and two forward years.

A July 28 review of the 31 countries in their list that also have country specific funds, that are available to US investors, shows overwhelmingly negative Revisions Ratios, meaning increasingly pessimistic expectations.

Few countries engender net positive expectation changes.

For 2008, only three countries have neutral to positive Revisions Ratios:

• Canada (EWC)
• Chile (ECH)
• Russia (RSX).

For 2009, only four countries have neutral to positive Revisions Ratios:

• Canada (EWC)
• Israel (ISL)
• Mexico (EWW)
• Russia (RSX).

For 2010, five countries have neutral to positive Revisions Ratios:

• Chile (ECH)
• Indonesia (IF)
• Israel (ISL)
• Mexico (EWW)
• Russia (RSX)

Make of it what you will, but those are the countries where analysts in the net see earnings improving relative to what was expected before.

Note that changing Revisions Ratios speaks only to the direction of earnings growth expectations, and does not address the question of valuation.

Note also that Revisions Ratios change over time and sometimes rapidly.

Comments

[Jmar11:]

While BRIC still offer opportunities, have you thought about the emerging markets (..frontiers) coming after BRIC? What do you you think of Kazakhstan?
There's an article that lists Mexico, Korea, Bangladesh, Egypt, Indonesia, Iran, Nigeria, Pakistan, the Philippines, Turkey and Vietnam as the next big countries for investors: www.greenfaucet.com/th...
While one should do their DD, it makes sense to look at other countries besides BRICs

2008 Aug 01 11:42 AM

[QVM Group:]

Not only have I though about frontier markets, but I have written several posts about them. The only liquid fund available in the US that makes sense to me for frontier investing is TRAMX (T.R. Price mutual fund) that invests primarily in Gulf Cooperation Council countries.

Kazakhstan may or may not be interesting, but there is no practical fund investments.

Clearly, the frontier markets will become the next emerging markets, just as the emerging markets will join the developed markets.

Case in point, Russia was not a market at all in the 1980's, became a frontier market in the 1990's and is an emerging market in the 2000's.

2008 Aug 01 12:23 PM