Revenue estimates methodology

The revenue figure typically reported on a company’s income statement (aka top line) is Net Sales, i.e. the amount of sales generated after the deduction of returns, allowances for missing or damaged goods, and discounts. In most cases, revenue estimates published by FactSet are comparable to historical net sales because the methodology used to calculate the consensus is based on brokers’ net sales estimates.

However, for some companies, revenue estimates and historical net sales could be difficult to compare. This is the case when the majority of brokers make estimates on a revenue figure that is not consistent with the sales figure reported by the company. For example, in the insurance sector, some brokers publish estimates based on gross premium while others use net premium, therefore the consensus could be either a net premium estimate or a gross premium estimates depending on the methodology used by FactSet.

The best way to anticipate such issues is to compare net sales actuals with reported revenues. Care should be taken if they are significantly different.