The Earnings Revision Ratio Calculator helps measure the overall sentiment of financial analysts about a company’s future earnings. It does this by comparing how many analysts have raised their earnings estimates versus how many have lowered them. A higher ratio often indicates positive market sentiment, while a lower ratio may suggest negative expectations. This tool is important for investors and financial professionals who want to understand shifts in analyst confidence and predict how a company’s stock might react in the future.
This calculator falls under the financial ratio analysis category. It is especially useful for equity research, earnings analysis, and forecasting future stock performance based on analyst behavior.
formula of Earnings Revision Ratio Calculator
Earnings Revision Ratio = (Number of Upward Revisions − Number of Downward Revisions) / Total Number of Revisions
Where:
Number of Upward Revisions = total number of analyst estimates or forecasts revised upward for earnings during a specific period
Number of Downward Revisions = total number of analyst estimates or forecasts revised downward for earnings during the same period
Total Number of Revisions = sum of upward and downward revisions during the measured period
Common Reference Table for Earnings Revision Ratio
| Upward Revisions | Downward Revisions | Total Revisions | Earnings Revision Ratio |
|---|---|---|---|
| 8 | 2 | 10 | 0.60 |
| 5 | 5 | 10 | 0.00 |
| 3 | 7 | 10 | -0.40 |
| 10 | 0 | 10 | 1.00 |
| 0 | 10 | 10 | -1.00 |
This table helps people understand the ratio quickly without doing the math each time. A ratio closer to 1.00 shows strong positive sentiment. A ratio closer to -1.00 shows strong negative sentiment.
Example of Earnings Revision Ratio Calculator
Let’s say a company has received 12 earnings revisions in the past quarter. Out of these, 9 are upward and 3 are downward.
Number of Upward Revisions = 9
Number of Downward Revisions = 3
Total Number of Revisions = 9 + 3 = 12
Earnings Revision Ratio = (9 − 3) / 12 = 6 / 12 = 0.50
This result means that analysts are moderately positive about the company’s earnings outlook.
FAQs
A high Earnings Revision Ratio means more analysts are raising their earnings estimates than lowering them. This often signals positive expectations for a company’s future performance, which can influence investor behavior and drive stock prices up. Investors might consider it a sign of growing confidence in the company’s financial health.
Yes, a negative Earnings Revision Ratio usually shows that more analysts are reducing their earnings expectations. This could indicate that the company might face challenges or lower-than-expected profits. Such revisions may lead to decreased investor confidence and can result in stock price declines if the market reacts strongly.
The ratio is most useful when checked quarterly, as earnings estimates are frequently updated during earnings seasons. Regular monitoring allows investors to spot trends early and adjust their investment strategies accordingly. However, it’s also important to consider other financial indicators along with the ratio for a more complete analysis.