Analysts’ forecast returns, recommendations and yields for all stocks in the S&P/TSX Composite Index

Risk appetite has returned to the stock market after a rather volatile and negative September.

Last month, the S&P/TSX Composite Index declined 2.5 per cent. However, these losses have now been recovered. On Wednesday, the S&P/TSX Composite Index closed at a record high.

The fourth quarter is off to a strong start for stocks. Month-to-date, the S&P/TSX Composite Index has rallied 5.6 per cent and it’s been a relatively broad-based rally – it’s not just energy stocks that are charging higher.

In fact, 10 of the 11 sectors are in the green, the only outlier being the Consumer Staples sector, which is relatively unchanged, down just 0.1 per cent.

There are six sectors in the S&P/TSX Composite Index that have delivered gains of more than 5 per cent: Energy, Materials, Information Technology, Industrials, Real Estate, and Financials. On an individual stock basis, 20 per cent of stocks have realized double-digit gains so far this month.

Stocks are rallying into the current earnings season. By the end of the month, almost 20 per cent of companies in the S&P/TSX Composite Index will have reported their quarterly earnings results.

However, while the S&P/TSX Composite Index is rising to an all-time high, earnings expectations for 2022 are also climbing. As a result, the valuation of the S&P/TSX Composite Index is holding steady.

Over the past month, 2022 earnings expectations for the S&P/TSX Composite Index have increased 4 per cent. According to Bloomberg, the S&P/TSX Composite Index is currently trading at a price-to-earnings multiple of 15.6 times the 2022 consensus estimate, which is just above its 10-year historical average P/E multiple of 14.3 times.

In order to keep the positive price momentum going for stocks, investors will be looking for strong earnings results and positive guidance from management when companies release their quarterly earnings results in the weeks ahead.

To see what analysts are forecasting ahead of the earnings results, this report includes a list of analysts’ target prices, recommendations, forecast returns, and dividend yields for all securities in the S&P/TSX Composite Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income).

The posted target price for each security is an average of all available target prices from analysts. A target price typically reflect an expected share or unit price 12 months from now based on an analyst’s financial modelling such as a discounted cash flow model or sum-of-the-parts model. All data is as of Oct. 20.

Once companies report their financial results in the weeks ahead, earnings expectations, multiples, and target prices could be adjusted meaningfully depending on the reported earnings and management’s outlook, if provided.

It’s important to note that high target prices which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.

Click here to download an Excel version of the guide.

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