The S&P/TSX SmallCap Index has rallied 4 per cent compared to a 5.4-per-cent price return for the S&P/TSX Composite Index. Major detractors to the performance of the TSX SmallCap Index are the energy and utilities sectors with losses of 3.5 per cent and 9.3 per cent, respectively.
In addition to underperformance, this earnings season has been volatile for small caps with many stocks seeing significant revisions to their average target prices. Nearly 90 per cent of companies in the S&P/TSX SmallCap Index have reported their quarterly earnings results and roughly 15 per cent of companies in the Index have seen double-digit revisions to their average target prices. These stocks are listed below.).
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low.