We sometimes discuss on here how useful or otherwise analyst reports are. Of course, such a general, sweeping statement blends and over-simplifies a wide range of very different products and authors. However, I recently clicked on a link to get some weekly posts of free analyst reports from a well-known local broker. This is presumably a marketing effort to cultivate me as a client. Now, I don't like shit-posting, so I won't name the house nor the author (they may be a member here, after all!), but when I read the report, I was stunned and thought I'd share (just to get it out of my system).

The report is an updated recommendation of $ALU published on 22-Aug, the day after $ALU posted its stunning result, which has been well-covered here on SM. For reference, the SP has risen 30% since the close of the day before the result, from $36.88 to $48.21.

OK. Now to the point of this straw.

Conclusions are: $40 PT (12 month); PT reduced from $42.50; HOLD

Key take-outs

• Small beat in revenue
• Small miss in EBITDA
• Small beat in NPAT
• Weaker than expected cashflow
• Final dividend above our forecast

There is absolutely no reference to the annouced major enterprise deal, no reference to the trends in $/seat, growth of Pro and Enterprise sales over Standard, nor any comment on the trend in Octopart transaction values, nor is there any reference to the CEO's description of what is going on within the company that is driving these results, including the step-up in R&D, and how this is expected to play forward.

To be clear, I'm not complaining about the PT itself, (even though I think it will be outside my range of scenario valuations when I update my model, so I recognise my predisposition here.)

What irks me is that the recommendation appears to be driven entirely by some extrapolation of plusses and minuses of the last year's financials and a judgement on the FY24 guidance.

Wow. Wow. Wow. We've talked here about "time horizon arbitrage" but I don't often come across it so blatantly as this.

Someone who holds a licence and has passed financial analysis exams, is making an investment recommendation and providing a valuation based on this report, presumably signed off by a Head of Research, and under the brand of a well-known institution. And, moreover, this "Research" goes into the weighting of the market consensus, which many of us consider.

I think this is an even worse report than one I saw a few years ago that recommended $ARX over $PNV based purely on revenue multiples!

To be clear, I am not using this example to denigrate analyst research generally; some I find is very good. But a lot is demonstrably not.

So, its times like this that I am truly grateful for the SM Community. Any number of members here publish far more insightful research and analysis.

OK - rant over, back to work.