Institutional Brokers' Estimate System (IBES): A Guide for Investors

What Is the Institutional Brokers' Estimate System (IBES)?

The Institutional Brokers' Estimate System (IBES), or I/B/E/S, is a financial database that aggregates analysts' earnings estimates, company guidance, and historical data for publicly traded firms. Launched in 1976 and later acquired by Thomson Reuters, it helps brokers and investors assess market expectations and inform investment decisions with wide company coverage and detailed financial insights.

Understanding the IBES

IBES provides a central hub for current analyst stock estimates and includes company guidance, which are future earnings projections updated quarterly or annually.

The first iteration of the IBES database was created by a brokerage firm in 1976 and traded hands several times, landing at financial analytics firm Primark, before being purchased by Thomson Reuters in 2000.

The database offers summaries and projections from analysts worldwide, including major and independent ones. It uses these estimates for various performance measures like revenue, earnings per share, price targets, and more.

Users can analyze data by year, fiscal quarter, or other timeframes to assess a company's performance.

The database includes recommendations from the analysts on whether to buy, hold, or sell shares in the public companies they cover.

How IBES Is Used

IBES offers a centralized system to aid decision-making by providing access to broad consensus estimates beyond daily analyst reports.

IBES can be used in a variety of ways. Forecast models for earnings per share results, for instance, can be created using IBES as a benchmark. The database also is used in accounting research.

IBES Spinoffs

Thomson Reuters has other distinct databases based on IBES. For example, IBES guidance data and earnings estimates are available to academics at the Wharton School of the University of Pennsylvania to review and evaluate expectations for companies. An IBES historical database is used to compare and test investment theories.

IBES is among several databases used by investors, while the Center for Research on Security Prices provides databases with stock prices and historical market data.

Advantages and Disadvantages of IBES

Pros of IBES

IBES compiles earnings estimates from sell-side analysts at investment banks and brokers, covering diverse industries and regions, providing a wide range of information.

IBES consolidates earnings estimates into a single database, saving investors time by centralizing forecast information and offering historical data access.

IBES updates its database regularly with the latest earnings estimates, ensuring that investors have access to up-to-date information. You can consider IBES data to be near-real-time. Not only will you have quick access to information, IBES implements validation checks, data cleaning procedures, and verification of credentials to make sure any input data is correct.

Cons of IBES

IBES relies on earnings estimates provided by sell-side analysts. Analysts might have biases due to incentives to maintain relationships with companies, leading to potentially skewed IBES data.

The specific methodologies used by individual analysts to formulate their forecasts may not always be transparent. This lack of transparency can make it difficult for investors to assess the reliability and credibility of the estimates. Plus, even though there are data checks, IBES data may still be subject to errors or mistakes.

While IBES updates its database regularly, there may still be delays in reflecting analysts' revisions to earnings estimates. In an industry where everyone is fighting for the same information, having small lags in data accessibility may be detrimental. In addition, IBES may have limited coverage for smaller companies or companies in niche industries. You may not always have access to the specific information you're looking for.

The Bottom Line

IBES serves as a central hub for analyst estimates and company financial data, offering broad industry coverage and both historical and real-time insights to support forecasting and informed investment decisions.

Its data quality controls help enhance accuracy, though analyst bias, occasional update lags, and limited coverage of smaller firms remain considerations. Overall, IBES is a valuable research tool, but users should stay mindful of its potential limitations when interpreting results.