Here are the returns of Buy recommendations per company. Quite often, returns tend to develop in the same direction over 100 days and 300 days.
Edit: corrected an error related to dividends
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Itâs also quite interesting to examine the realized returns at the recommendation level. The first table shows the extremes of Sell/Reduce recommendations in terms of realized returns over the 300 days following the recommendation.
A similar table for Buy/Sell recommendations. The proportion of Buy/Sell recommendations in the tables is also interesting.
Itâs not always easy to pick winning/losing stocks.
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The direction of buy/add recommendations matched actual returns particularly well during 2020, when as many as 95% of price developments were correct when looking 200 and 300 days ahead.
The following year, however, was a low point, when the direction matched the guidance in 10% of recommendations. Recent years have clearly been worse than the initial years, but perhaps the next bull market will be timed better.
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@Antti_Viljakainen and @Petri_Gostowski, in your DCF calculations, should the tax rate for domestic companies be lowered from the current 20%, given that from the beginning of 2027, the corporate tax rate in Finland will be 18%? For a large number of companies on the Helsinki Stock Exchange, income tax is primarily paid to Finland.
Good that the matter is pending 
Although the change in corporate tax has not yet been enacted into law, the change is certainly more reliable and accurate than most future forecasts provided by companies or analysts 
Therefore, there should be no delay with this in analyses
@Petri_Gostowski, is the tax rate in Inderesâ DCF model always a schematic 20%? Couldnât it be calculated company-specifically as an average of n-years of realized taxes? Although history is not a guarantee of the future, it still tends to repeat itself.
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Yeah, indeed, the tax rates are definitely intended to be lowered, and thatâs whatâs been instructed. Although, isnât it still the case that it hasnât been hammered into law yet, but it looks very strongly like it will happen. 
For domestically-driven companies, itâs indeed a clear drop, but then for multinational corporations, it starts to be quite a small tinkering, but this is, of course, company-specific. For quite many multinational corporations, tax rates vary quite a lot, and itâs very difficult to accurately estimate where the profit is actually made and thus where the tax rate will settle. This as a side note, as this matter has now been (internally too) on the table.
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The tables presented above clearly show two major problems with analysis recommendations.
First. Analystsâ analyses are schematically based on mathematical formulas that function decently only in stable market conditions and within a short time perspective â often only for a couple of three quarters.
Second. Analystsâ ability to reconcile companiesâ fundamentals and their changes with the aforementioned schematic models is weak. A good example of this is the recommendations during the boom bubble of the early 2020s. Stock behavior was prioritized, claiming and assuming that companiesâ competitive fundamentals were in order, even though many companies had no knowledge of this.
For almost no company during the boom period, perhaps with the exception of Qt, were the companyâs fundamentals properly analyzed; instead, there was a rush into continuous market rallies and buy recommendations.
Finally. Inderesâ inexperienced analysts are unable to be sufficiently critical in turbulent market environments, and their analysis perspective is too short (about a year at most), even if something vague is attempted to be said for a longer period. Furthermore, the analyses are too much in line with the companiesâ views. Nothing compels giving recommendations in a difficult analysis environment.
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A bit of a silly question, but can any of the analysts (or anyone) tell me what âother equityâ is, and also why arenât distributable funds reported in the âbalance sheetâ section of the analysis?
Isnât profit distribution only possible from distributable funds, which can be found in every companyâs balance sheet notes? Itâs possible Iâve misunderstood this somehow, but it would be nice to hear how things are.
(Harviaâs figures are attached as an example).
.
Edit: Iâll tag @Rauli_Juva here, he made the report in question.
I canât think of anything else but that it might be a share premium fund?
Someone wiser might be able to explain this even better, but in Inderesâ reports, balance sheet items are usually presented slightly differently than in the companyâs own reports. For example, in Harviaâs own 2023 balance sheet, there are two items, âretained earningsâ and âprofit for the periodâ, which in Inderesâ report are combined into a single item on the line âretained earningsâ.
As I understand it, distributable funds refer to equity that can be distributed to owners, meaning it includes the balance sheetâs retained earnings and other unrestricted equity funds. This is just not separately recorded on its own line in the balance sheet.
Also, the 32.4 million item âother equityâ in Inderesâ report is recorded under âother fundsâ in Harviaâs report. The more detailed content of the line can be found in the financial statements.
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@JP1919 already largely explained the matter, in my opinion.
For some historical reason, which I donât know myself, that equity has been divided in our reports in that way. Equity can include various funds; in our classification, those not separately listed as a revaluation fund go under âotherâ. I havenât really thought much about the different items of equity, and in my opinion, they donât have much significance, at least in a clearly profitable and solvent company like Harvia.
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Iâd like to add to this OPO discussion that at least some companies report a more detailed breakdown of equity only in their annual report, and not much can be gleaned from the financial statements. Therefore, the current classification of âother equityâ is more suitable when examining Q4 reports, as one simply needs to get the entire lump sum of equity into the model.
I donât know if the current presentation format of the model is due to that, but at least it serves this situation.
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There are no instructions that it should always be a formulaic 20%, but quite often it seems to be that. Of course, it could be calculated from history for many companies, but it must be noted that for many companies, that tax rate tends to fluctuate quite a lot due to various tax-exempt items. From my own monitoring, letâs mention Outokumpu, where historical losses and similar factors have led to this. For the previous 7 years, the model shows an average of something around 2% for Outokumpu, which of course is not the companyâs tax rate in the long run 
However, for the setting of our WACC percentage, that tax rate is not a very essential variable, but of course, the tax rate itself should also be based on something.
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It came to mind while reading that linked article that Inderesâ policy is not to be âneutralâ, âholdâ, âmarket performâ, âequal weightâ or similar.
Without checking the practices of other analysis houses, in Nesteâs case, at least 8/19 have arrived at a âneutralâ-like verbal assessment, meaning 5 recommendation levels seems to be a fairly common practice.
Of course, one can generally question the sense of these verbal assessments at all, because stock prices live every moment. Whereas the numerical target created by an analysis house is ultimately the concrete chosen estimate, and based on which the verbal assessment is formed.
But to the point: in my opinion, Inderesâ principle of not being neutral is wrong in the sense that, when compared to other firms, it uses a different scale, and
- When calculating consensuses, it takes a different stance than the 5-tiered basic model (Buy, Add, Hold, Reduce, Sell)
- For monitored companies, the verbal assessment lacks a midpoint, and readers of the worldâs news clutter get a different impression when Inderesâ assessment falls in the middle compared to other analysis houses. This doesnât always matter, but it clearly has significant importance for smaller firms - if Inderes is even the only analysis house monitoring them - the practical difference and verbal message are significantly emphasized.
Well, one can of course say that the numerical target would just be a secondary guide from many scenarios, but the verbal assessment is nevertheless based on the deviation of the stock price from the numerical target at a given moment - i.e., at the time of writing the analysis.
I myself would, appealing to commensurability, welcome back the fifth step, as well as bull & bear scenarios with some level of confidence to complement the numerical target.
https://forum.inderes.com/t/neste-ilmastonmuutostaistelun-eturivissa/252/3622?u=opa
vara-services.com/neste/ https://share.google/WJeK9YVHBRj0PnT4Y
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Inderesâ analyses and the performance of its model portfolio have taken a lot of flak in recent years.
I just looked at Inderesâ recommendation distribution. 169 companies are under coverage. There are six buy recommendations and also six sell recommendations. The remaining 157 are either add or reduce. In my opinion, there used to be many more buy recommendations, especially. It gives the impression that since the analysesâ positions have often been incorrect recently, the analyses have become more cautious, and they donât really dare to issue strong buy/sell recommendations, which is psychologically understandable. Or have analysts consciously tried to keep their views more conservative than before?
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A question regarding Inderesâ forecasts: if the consensus row in the forecast table is empty, can one assume that Inderes is the only one providing analysis for the company in question?
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It canât be assumed definitively, because for some companies there might be a second or even a third analysis available, but no consensus is aggregated. Often, of course, we are the only ones covering them.
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