Broker consensus
Valuation & CompsThe average of published analyst estimates for a listed company, and the usual source of the denominator in a forward multiple.
Also written: consensus estimates, sell side consensus
Consensus is the aggregate of forecasts published by the analysts covering a stock, typically a mean or median for revenue, EBITDA and earnings per share over the next one to three years. It is the closest thing to a market view of future performance, which is why forward multiples are built on it.
It is an opinion rather than a reported figure, and it behaves like one. It updates slowly after news, because analysts revise on their own schedules, and it carries a documented tendency toward optimism, particularly further out in the forecast period.
Coverage depth matters more in Europe than a US oriented guide will suggest. A widely held large cap can have twenty or more estimates behind its consensus, while a smaller listed company in a Nordic or Iberian market may have three, one of which belongs to its own corporate broker. A median resting on three estimates is a much weaker number than one resting on twenty five.
The practical discipline is to check how many estimates sit behind any consensus figure you rely on, to check the date of the last revision, and to say so when a forward multiple in your table is materially less well supported than the others.
Worked example
Two peers both trade at 8.0x forward EBITDA. One figure is the median of twenty two estimates updated after the last results; the other is the average of three, the most recent of which predates a profit warning.
The multiples look identical in the table and are not remotely equal in reliability, which is exactly the kind of thing a footnote exists for.