Profit forecasts are forward-looking statements in the form of estimates of the expected profit and financial development of a company. As part of a securities prospectus, these forecasts are a supplementary instrument of capital market communication. A well-founded forecast can serve investors as a basis for company valuation and proactively manage the expectations of investors and analysts.
Differences in the design
There are three forms of profit forecasts:
- the qualified comparative forecast
- the bandwidth forecast
- the point forecast.
This is one of the findings of our recently updated analysis of securities prospectuses published for new and follow-on issues on the regulated market of the Frankfurt Stock Exchange in the period from January 2019 to June 2024.
We have observed that profit forecasts are based on the standards established in the market over time, especially in the case of securities prospectuses from the recent past, both in the presentation of the forecast and in the underlying assumptions and factors.
Trend: profit forecasts are increasing
While the inclusion of a profit forecast in the securities prospectus was sometimes avoided in the past, it can be observed in more recent capital market transactions that both issuers and the banks accompanying the transaction are increasingly including the profit forecast in their securities prospectuses. The background to this is to support the marketing of securities in addition to reporting on DRS 20.
From 2021, a profit forecast was published in more than half of the securities prospectuses. In the first half of 2024, two out of two securities prospectuses contained a profit forecast.
Profit forecasts as a marketing tool
Profit forecasts have established themselves as an important marketing tool for securities. The preparation of a verifiable profit forecast will therefore increasingly be an integral part of any IPO preparation. It creates confidence among potential investors and is a good prerequisite for communicating reliably with the capital market in the future as part of regular financial reporting.
Forecast information such as a profit forecast in securities prospectuses can strengthen investor confidence in the IPO process and thus make an important contribution to a successful IPO.
Please download the complete results in the publication "Forecasts and estimates in securities prospectuses" here.
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Felix Schieler
Partner, Audit
KPMG AG Wirtschaftsprüfungsgesellschaft
Stephan Pastusiak
Director, Advisory
KPMG AG Wirtschaftsprüfungsgesellschaft
Katrin Skowronek
Director, Audit, DPP, Capital Markets Advisory
KPMG AG Wirtschaftsprüfungsgesellschaft