To: AlienTech who wrote (7371 ) 4/8/1998 11:45:00 PM From: LastShadow Read Replies (2) | Respond to of 120523
Analysts place the assessment on a stock of whether is is a strong sell through a strong buy (or, depending on the financial institution that is doing the analysis, it could market perform, under perform, or accumulate or whatever - but it basically is a 5 level assessment). In many cases, and it should be always if the analysts are doing a good job of looking at a company, its suppliers, its market/sector/etc., there really shouldn't be much adjustment as it should be built into their current assessment - that is, whatever that guy researching this company figures out its potential or lack thereof, it should be reflected in their current assessment. Houses that change their assessment after the fact aren't really following those companies, but rather just providing some form of current guess. Now, some things aren't readily visible to the analysts, and acquisitions, hidden costs, losses, business shortfalls or the counter postive elemtnts to all those things, can generate surprises. When a market is volatile and overvalued, it tends to create kneejerk reactions by traders, etc. to sell off when they don't perform as well as the collective body of analysts are saying they should, and buy wildly when it does do better. The actual numbers are important, but EPS is relative to the sub-industy - say, is MSFT overvalued? does that make it a bad buy? Would analysts saying it isnt going to meet estimates change its price/volume a whole lot? On the other hand, if NSCP has bad reviews, it tanks. So no, there isnt an exact correlation between the numbers and the assessment of whether its worth holding/selling/buying. Thats why you never read just one analyst, but the concensus of 'opinions' - and when everyone is saying it isnt a buy, a contrarian looks at it to see if it is, becassue it doesn't get upgraded until after the analysts house buys in... ls