What will stock prices look like in a year? Zimmer

1. What will stock prices look like in a year? I want this answer for personal and financial reasons. I want to make money and I am strongly considering a career in finance. Obviously if I know that the price of a stock will be higher a year from now than it is right now, I’ll buy that stock and make some money.

 

2. 

To predict stock prices there are numerous techniques used by analysts on wall street. Sell-side analysts build financial models for companies using historical income statement data. Predictions about future financial performance for companies are also made using company issued outlook forecasts, investor presentations, and SEC mandated forms like the 10-k and 10-q. Analysts ultimately use all this data to put together model for the company which forecasts key indicators of performance such as earnings per share (EPS). Someone seeking such data, like an investor or a hedge fund, would have to get it from someone who has made a financial model (and preferably a reputation for making good ones).

              There is no guarantee that an individual’s model will be correct. Over the summer I created a financial model for a fortune 500 company and my valuation suggested that the stock was worth roughly $288 and at the time it traded for $214. There is no guarantee that the stock will ever reach $288. If there were, then the market would realize its true value and it would be trading at $288 right now. Someone else’s model could value the company at $195 a share. The vast uncertainty helps make it such a boom or bust business. One way uncertainty could be measured in this practice is by having a “bear case” and “bull case” or in more standard English, a best case and worst case scenario. What this means is in addition to you base model, the analyst will also put together a model in which they assume everything goes right for the company and another in which they assume the company can’t catch a break.

              This practice dates back to the early days of the stock market as investors have always been looking for ways to forecast stock prices. However, the wealth of information available to analysts hasn’t always been available. The SEC wasn’t created until 1934 and it wasn’t for years after that companies would be required to submit the information now included in forms like the 10k.

              I use this predictive system regularly and occasionally create my own. I occasionally dabble in day trading and financial modeling is the  best way to make predictions when the stock market is involved.