One of my Heavyweights missed their quarterly EPS estimate should I sell?

No absolutely not…  in fact this may create a buying opportunity.

Sometimes the market can get ahead of itself by pricing a companies stock on its expected future earnings. These expected future earnings are sometimes called “The Street Consensus”.

The consensus value is continually being updated by combining the estimates of all the analysts that cover and reports on a particular company. While these analysts use sound logic based on company guidance and outside economic factors they are still estimates and not always perfect. If the consensus estimate turns out to be lower than the actual earnings reported by the company the stock price will likely go up because investors are please the company has been more profitable than expected. Conversely if the actual EPS are below the consensus value the stock price may go down due to investor disappointment.

It is quite possible that an EPSG Heavyweight will miss on an estimate for a given quarter but their TTM EPS continues smooth upward trajectory we like to see. Basically whet we are saying is that in ten years no one care about this quarter but if the EPS continues to rise you can be assured the stock price will be higher than what it is today.

Whenever a company disappoints the market you do need to ask yourself if anything has changed in the companies business. You may even want to take this opportunity to do a bit of reading. If you conclude that nothing significant has changed in the companies long term business then their EPSG Heavyweight ranking should give you the confidence to continue to hold the stock and possibly the conviction to buy more because it is on sale.

Like the analysts you will not get it right 100% of the time but by using data and doing a bit of homework you can put the odds in your favor.