Why Do Maximum Suggested Buy Prices Change from Issue to Issue?
Posted on Friday, December 7, 2012
An Investor Advisory Service subscriber wrote to us recently wondering why the "buy up to" prices of stocks changed from month to month. Here is the answer from our analyst team.
As Joe M. wrote:
"I was wondering why the buy-up-to values change from month to month even though there was no new data released for the given company. For example, MWIV was a buy up to $82 in the June 2012 issue (where MWIV results were presented). In July and August issues the buy up to value for MWIV is $79. I observed this with multiple stocks within the portfolio sorts lists. What causes the buy up to value to change then if it is not based on the company quarterly results?"
IAS analyst Scott Horsburgh, CFA, provided the following answer:
"All the 'buy-up-to' prices change many times a year, but for different reasons. Earnings are revised for the entire roster of companies two to four times a year. This revision triggers a special mention in the News of Companies section of IAS. P/E ratios are updated on a fiscal year basis for each company. There are also small periodic revisions that are made on an as-needed basis, unique to each company. Neither of these last two types of changes triggers a subscriber warning because they happen all the time. They are simply part of our review process and intended to be sure that each buy-up-to price reflects our thinking at the time."