Our Modeling Approach
We model earnings based on consensus estimates, not our own opinion of the earning capacity of any of the companies we cover. This serves two purposes: 1) It gives our model users a base-line starting point from which they can make adjustments using their own expectations for the company, and 2) It allows our users to isolate the impact of new earnings results each quarter to determine if the price movement after each release is logical.
We have two categories of models: Tier 1 and Tier 2. Each of our Tier 1 Excel-based models include the Income Statement, Segment details, Balance Sheet, Cash Flow Statement, Market Multiple share valuation, and Discounted Cash Flow Valuation. Each Tier 2 model includes the Income Statement, Segment details, and a Market Multiple share valuation. The financial statements and valuation sections for both tiers are linked through equations, which allow our users to seamlessly change assumptions and instantly see an estimate of the impact on earnings and valuation.
We have two categories of models: Tier 1 and Tier 2. Each of our Tier 1 Excel-based models include the Income Statement, Segment details, Balance Sheet, Cash Flow Statement, Market Multiple share valuation, and Discounted Cash Flow Valuation. Each Tier 2 model includes the Income Statement, Segment details, and a Market Multiple share valuation. The financial statements and valuation sections for both tiers are linked through equations, which allow our users to seamlessly change assumptions and instantly see an estimate of the impact on earnings and valuation.
Our Model Update Schedule
We break each quarter's earning cycle into four distinct stages:
Stage 1-End of Calendar Quarter: Our first stage is used to prepare our models for the upcoming earnings season. We update the Beta, Risk-Free Rate, Volatility, and Market Multiple for each of companies we cover.
Stage 2-A Few Days Before the Earnings Release: We make the final preparations before the press release including any updates the company may have pre-announced. We also do one final re-calibration to meet consensus estimates, and analyze where consensus estimates stand relative to management's latest guidance.
Stage 3-The Day of the Earnings Release: We update our models immediately following the press release to include the current quarter results and any new guidance given by management.
Stage 4-A Few Days After the Release: After all of the analysts have submitted their updated estimates we re-calibrate our model again to meet those estimates.
Stage 1-End of Calendar Quarter: Our first stage is used to prepare our models for the upcoming earnings season. We update the Beta, Risk-Free Rate, Volatility, and Market Multiple for each of companies we cover.
Stage 2-A Few Days Before the Earnings Release: We make the final preparations before the press release including any updates the company may have pre-announced. We also do one final re-calibration to meet consensus estimates, and analyze where consensus estimates stand relative to management's latest guidance.
Stage 3-The Day of the Earnings Release: We update our models immediately following the press release to include the current quarter results and any new guidance given by management.
Stage 4-A Few Days After the Release: After all of the analysts have submitted their updated estimates we re-calibrate our model again to meet those estimates.