German firms boost forecast accuracy, shows cometis study
German firms’ transparency and accuracy of forecasting ‘improved significantly’ across the DAX, MDAX, SDAX and TecDAX between 2013 and 2016, according to new research from cometis.
Analyzing both qualitative and quantitative information on future business development published by companies across the four indexes, cometis says sales forecasts are the most popular form of guidance, with more than 60 percent of the 160 index companies offering predicted sales numbers in each of the four years considered.
‘On the earnings side, the observed picture is more colorful,’ notes cometis in a press release announcing the results of its ‘Guidance policy of index companies in Germany’ study. ‘Ebit was the most frequently used financial ratio, [while] Ebitda and the Ebit margin follow in second place.’
‘Analysts and investors assess not only the bare financial indicators of a company, but also the planning skills of the management within the framework of forecasts. They expect a plausible and realistic guidance,’ explains Henryk Deter, member of the cometis management board, in the press release.
As part of the improving guidance from German companies, cometis also notes the declining use of ‘inadmissible forecasting methods’.
‘These include purely comparative forecasts,’ says the firm – for example: We expect to see an increase in revenues for the financial year 2017, as well as qualitative forecasts such as: We expect satisfactory revenues for the financial year 2017.
‘The proportion of inadmissible forecasts for top-line ratios such as consolidated sales fell significantly from 34 percent to 7 percent in the years 2013 to 2016, and from 39 percent to 11 percent for earnings ratios in the income statement,’ says cometis. ‘For investors, this development means greater transparency and planning certainty. For the management of listed companies, it is a challenge that arises anew every year.’
The research also highlights one company from each index that performed particularly well on guidance between 2013 and 2016, and one from each deemed to have been a flop.
|MDAX||Fielmann||Steinhoff International Holdings|
|SDAX||SAF Holland||Borussia Dortmund|
|TecDAX||United Internet||Dialog Semiconductor|
Adjusted for companies whose listing took place after 2013. Source: cometis