Exploring the Usefulness of Security Analyst Capital Expenditure Forecasts in Estimating Eps Growth and Implementing Firm Valuation

Project Details


This innovative research project aims at security analyst capital expenditure forecasts, exploring the role they play in estimating EPS growth and implementing firm valuation, which is among the most discussed research topics in the fields of accounting and finance. The key to accurately estimate firms value is to estimate the future growth of the company. In spite of the prevalence of using security analyst earnings forecast to estimate firm value, this study posits and plans to demonstrate that analyst capital expenditure forecasts have significant marginal explanatory power to firm values. Specifically, analyst research reports provide a much richer set of measures that serve to reflect which component of the Du Pont Identity the analysts perceive to contributes to firm growth the most. It may be insufficient that researchers or practitioners use exclusively earnings forecasts for valuation purpose.? Moreover, when companies decide to engage themselves in investing activities in the future, they are likely to foresee promising cash inflow streams further deep in the future. Accordingly, analysts’ forecast capital expenditure are likely to lead their forecast earnings or forecast revenue. Centering on analyst capital expenditure forecasts, this study examines (1) whether these forecasts lead the simultaneously issued analyst earnings forecasts and/or revenue forecasts, (2) the extent to which analysts incorporate these forecasts when they make investment recommendations, (3) whether these forecasts help explain the difference between the predicted recommendation derived based upon subtracting the intrinsic firm value estimated by valuation model(s) in prior studies from market price and the recommendation issued by analysts, (4) the extent to which these forecasts reflect analysts’ perceived future asset turnover of the firms, (5) the extent to which the rigidity of these forecasts reflect analysts’ predictability, and (6) the effectiveness of adopting these forecasts to construct measures for firms’ marginal value products (MVPs) of capital.
Effective start/end date1/08/1831/12/19

UN Sustainable Development Goals

In 2015, UN member states agreed to 17 global Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all. This project contributes towards the following SDG(s):

  • SDG 1 - No Poverty
  • SDG 12 - Responsible Consumption and Production
  • SDG 17 - Partnerships for the Goals


  • Analyst Capital Expenditure Forecasts
  • Firm Valuation
  • Asset Turnover
  • Optimal Capital Structure.


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