When calculating the consensus, date-weighting is used to give more emphasis to recent forecasts.

Brokers' recommendations are indicated with abbreviations like LTB for long-term buy and TPR for take profits. A full list of these abbreviations can be found here.

There is no consensus for recommendations as they are all made on different dates and at different ruling share prices.

Sometimes brokers' forecasts are excluded from the consensus for reasons like profit warnings (indicated by 'w'), age ('a'), structural changes in progress ('s') and the temporary disqualification of the broker who might be acting for the company on an acquisition or rights issue ('b'). If a results
announcement has rendered a forecast obsolete it is flagged 'r'. Other anomalies are flagged 'd' for 'different basis'.

Just below the consensus forecast there are two lines showing the one-month change and the three-month change compared with earlier consensus forecasts.

In essence, REFS' aim is to provide a consensus which is date-weighted after excluding old forecasts and 'outlying forecasts' (ie those with a large deviation from the norm).

Anumber of points deserve special mention when studying details of brokers' consensus forecasts:-

1. The reliability of the consensus forecast (and therefore of the PEG) is considerably enhanced if there is a large number of brokers (say five or more) covering the company, and a small standard deviation from the average forecast. Watch out for the lemming effect, however. If a prestigious and top-notch broker makes a forecast for a company in an industry in which he is known to specialise, it is very tempting
   for an analyst working for a lesser firm to take a lead from the much more detailed research.
2. With many smaller companies (especially AIM stocks) there is often only one broker's forecast. Placing undue reliance on this clearly adds to the risk. A very keen eye should be kept on directors' dealings and the relative strength of these shares.
3. The company's own broker or brokers are highlighted in a panel above the Outlook statement. I pay special attention to the company broker's forecasts especially if the brokers in question are prestigious. The company broker should be better informed and is less likely to take the risk of embarrassing the company with over-optimistic
   forecasts.
4. The recency of brokers' forecasts is obviously of critical importance. I usually compare the last few forecasts with the consensus to see if there is a major discrepancy. Date-weighting will, of course, have taken this into effect in a more calculated way.
5. A keen eye should be kept on the one-month overall change, the three-month overall change and the number of pluses or minuses, as they all indicate if newsflow is becoming more positive, remaining neutral or beginning to turn negative.
6. An important caveat about the EPS figures is that the tax rate sometimes varies substantially. When a company is recovering from a loss-making position, after a year or so any tax losses brought forward are likely to be exhausted. At this point, the company begins to pay a full tax charge again and EPS are reduced accordingly. Even though profits before tax might be increasing by, say, 20% in the year ahead, this could be masked by the increased tax charge. It therefore pays to keep an eye on pre-tax profits figures as well as EPS and to double-check the historic and forecast tax rates, which are shown in the panel of seven-year figures.