This table shows you how many analysts revised estimates in the past week and over the course of the past four weeks. To evaluate these numbers, compare the number of revisions with the total number of outstanding estimates. The latter can be found in the Historical Mean EPS Estimates Trend table.

True or false: The most challenging investment scenario occurs when you see a large number of downward revisions (i.e. large relative to the total number of outstanding estimates).

At first glance, it seems obvious that the above statement would be true. After all, a large number of downward revisions means that the company is showing a propensity for negative earnings surprises, the sort that can send stock prices spiraling downward. But let's look at this more carefully. Chances are that the shares of a company like that will already have been driven to deeply depressed levels, as investors became conditioned to expect bad news. If you are a momentum-oriented investor, your decision is an easy one: avoid downward revisions. On the other hand, contrarians will, at the very least, want to prominently feature such companies on their watch lists (the latter would theorize that such beaten-down shares have only two possibilities; move more-or-less sideways as gloom persists, or soar in response to unexpected good news). Either way, whether you're a momentum investor or a contrarian—a large number of downward estimate revisions—makes for a relatively simple investment decision. So the above true/false query isn't as obviously true as it first seemed.

In fact, the most challenging investment scenario occurs when you see revisions in both directions. Remember,the modern trend in investor relations (as discussed in the section on Earnings Surprise) is for corporate management to take increasingly active roles in guiding analysts toward earnings estimates that are compatible with the expectations of management. When you see estimates going up and down to significant degrees, that may be a signal that the traditional analytic/investor relations process isn't functioning in a normal way. When most analysts are raising estimates, it's easy to be bullish about a stock. When most analysts are lowering estimates, it's easy to be bearish. But when opinion is split, it's reasonable to assume that the stock is "incorrectly priced" and that a corrective move, one way or the other, is on the horizon. Under such a scenario, the downward revisions will be holding the stock at a price that would be too low if the upward revisions prove correct. At the same time, the price is being propped at a level that will ultimately turn out too high should the company report earnings in line with the downward revisions. This is why we maintain that a split opinion presents the most challenging investment scenario. Many will avoid these as a matter of course (based on the idea that any uncertainty at all is inherently bearish). Other, more aggressive, investors will be attracted to such situations, based on the greater returns they stand to earn if the extra homework they need to do helps them correctly decide which group of analysts to believe.

We would be remiss if we failed to cover the most bullish scenario. A significant preponderance of upward revisions is evidence of a propensity toward positive surprises. But even here, don't be complacent. Many, perhaps most, of these stocks will fare well. But the more habituated the Street becomes toward good news, the harder the stock is likely to fall should something go wrong. Contrarians will be especially sensitive to this issue.

Finally, take note of whether revisions have occurred in the past week, or over the four-week span. There's always a question about how quickly a stock will react to revised estimates. If most of the revisions occurred two, three or four weeks ago, it's very likely that the stock has already reacted to the news. After all, news of revisions is disseminated very quickly nowadays. In such a case, focus your attention on the next quarter. Meanwhile, it's possible that the stock has likewise digested all the revisions that occurred with the past week, but this isn't quite so clear-cut. Not every analyst is equally prominent, so there is some variation in the speed and extent to which individual revisions will influence share prices. Hence there may still be time for you to make an investment decision based on a revision that occurred in the one week time frame. (Note: This data is posted once per week. So if you wish to catch a stock while it is still adjusting to estimate revisions of the past week, it's best that you make a habit of consulting these tables every Monday, or at least as early each week as possible.)