Most of the big institutional investors utilize valuation models that are based on earnings estimates to determine a stock’s current worth or value. When a company reports quarterly results that are meaningfully better than expected, analysts who follow the stock must reexamine and revise their earnings estimates upward. This increases the attention paid to a stock. The upward estimate revision is going to raise institutional investors’ projected value of the company. When earnings estimates for a stock head up, shares, of course, become more attractive—and invite buying.
