REFS is
a mine of invaluable information for the private investor.
Selecting shares without its help is like trying to
clap with one hand tied behind your back.
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Calculating
the growth rate on a rolling 12 months-ahead basis
When the growth rate is
calculated on a rolling 12 months-ahead basis, using forecasts, the suffix ‘(pr)’
indicates ‘prospective’.
The calculation compares EPS
for the 12 months ahead with EPS for the 12 months just elapsed. Occasionally
this coincides exactly with the end of the company’s financial year, but otherwise
EPS must be apportioned, giving estimated EPS values for the 12 month periods
either side of the point of measurement.
To illustrate, the following
example shows the calculation of 12 months-ahead earnings growth, measured at
31st January 1997. The Company’s next year end is 31st March 1997, and earnings
forecasts are available for the current year to March 1997 and following year
to March 1998. The growth rate works out at +14.4%:
12 MONTHS-AHEAD EPS GROWTH
AT 31 JAN 1997:
(20.6P - 18.0p)
------------------- X 100 =
+ 14.4 %
18.0p
(NOTE: A minus sign indicates
negative growth. When necessary, EPS for individual periods are adjusted to an
annualised basis before calculating the growth rate. EPS forecasts usually cover
the next two unreported periods, but if one forecast only is available, the growth
rate for the first period is presumed to be valid for the second.)
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