As we all hear many times the stock market is uncertain and hence it is important for every trader or investor to do the right homework before investing their money in any trade.
Here we are going to talk about “stock ratings”, which play a very important role in the prediction of the performance of any stock. You will surely listen to this term every day in business channels and from financial newspapers.
Introduction of Stock Ratings
Any recommendation of buy, sell or hold a stock can be elaborated as stock ratings. All the research analysts and expert traders keep you aware of many stocks by sharing stock ratings every day. By keeping an eye on these stock ratings, you can easily find which stock is outperforming, and which one is under performing.
Stock ratings help you to make the right prediction and hence to make the right decision as well. To make the picture clearer for you, today we are going to discuss what a stock rating is and how to use it for investment decisions.
Let’s know what Stock Ratings are
Stock ratings are the parameters that describe the overall performance of a stock, within a certain time limit. Almost every brokerage firm and analysts consider these stock ratings for suggesting retail traders and stock traders.
Stock ratings help you to get an idea about the price movement of a certain stock, according to which you can either buy, or sell, or can hold the stock.
These stock ratings are issued quarterly (every three months). It also includes a target price which helps the traders to calculate the stock’s intrinsic value according to the current market value.
How do analysts work on stock ratings?
There are many aspects that research analysts consider before recommending any stock. These aspects include:
- Financial statements
- Quarterly company’s conference calls, and
- Company’s working pattern according to its future goals.
Besides this, Analysts also work on the company’s past performance details and also contact the management and customers of the company, to have a clearer vision. Many surveys and researches also get conducted by the analysts, from which they get an idea about future goals of the company. By this, analysts also get able to calculate the scope of growth for the company in future.
After doing this, analysts get a detailed research report ready, which later gets issued on the stock either by the bank or by the analysts.
Five major types of Stock Ratings
Above we had successfully discussed what a stock rating is and how to use it for investment decisions. To understand more about stock ratings, you should know its five major types, which include:
- Sell Ratings- This indicates or suggests the traders to sell a particular stock whose price is going to decline for the short or mid-term, according to the analysts. A possessive sell rating determines that the analyst or researcher is strongly expecting the price to decline from the current level in the near term.
- Buy Ratings- This suggests the traders buy a specific stock as the analysts are having clues that the stock price is going to rise from its current level in near terms.
- Hold Ratings- These ratings suggest that the particular stock is going to perform the same or is going to stick to the same price for the near term. These ratings are linked with some uncertainties or with some prediction for the company’s new service/product which can later serve you profit.
- Under-perform- These ratings indicate that the company is going to perform down as compared to the market average or benchmark index. In such a situation, the analysts asked you to stay away or avoid investing in stocks of that particular company.
- Outperform- These ratings tell you that a particular company is going to perform well in the coming days and is going to provide high returns in comparison to the market average or benchmark index.
Stock ratings help you to judge the performance of several stocks. It helps you to make an adequate trading plan to earn maximum profit. So, if you are strategizing your trading moves, you need to stay updated with everyday stock ratings.
Stock ratings give you a picture of the performance of many stocks. These stock ratings are based on adequate research done by the analysts, based on the company’s current situation and its plans.
All the five types of stock ratings which are selling, hold, buy, unperformed, and outperform help to make your prediction right about a particular stock. So here was all about the stock ratings. Stay connected with us for more such updates and news of the stock market. Also, share your suggestions and views in the comment section below.