Objective
To help an equity research client track the accuracy of production guidance provided by different companies compared to actual output.
Methodology
We devised a model to compare the company’s guidance accuracy and monitor the factors responsible for failing to meet or exceed guidance.
- We captured the annual production guidance provided by companies and actual production numbers using companies’ quarterly, half-year and annual reports, and investor presentations.
- We tabulated the percentage variation for each guidance from the corresponding production numbers.
- Researched and analyzed the reasons for not meeting / exceeding the guidance.
- Compiled a percentage variation of the annual production from the initial, latest and maximum guidance.
- We plotted the guidance and actual production on a line chart to present the complete picture of reporting accuracy.
Outcome
We prepared a comprehensive report providing an in-depth view of the company’s reporting of guidance and production. Using this analysis, we could assign proper weightage to the guidance given by a company while compiling future estimates for financial modelling. The modelling could identify the operational efficiency achieved by a company over a given period of time and highlighted the closures or suspensions of plants and mines.
