What Do Stock Analyst Ratings Mean? Buy, Sell, Hold, And More

Stock analysts use many different words to describe their ratings.

They commonly use the terms buy, sell, or hold, which are easy to understand.

But other analysts use more confusing terms like strong buy, outperform, overweight, underperform, underweight, and several others.

This article explains what all the different ratings mean and how you can use them to make better investing decisions.

What stock analysts do

Female stock analyst

A stock analyst is a person who works for a financial firm or investment bank. Their job is to analyze companies and decide whether their stocks are worth investing in.

They analyze financial statements, listen to quarterly conference calls, and may also get in direct contact with a company’s management and key customers.

In addition, analysts often do surveys and various types of research that give them information on how well a company is doing.

After they complete their research, they give a rating (buy, sell, hold, etc.) and a 12-month price target — as in, what they think the stock price will be at in a year.

The analysts then typically release extensive research reports on the stocks, along with predictions for earnings per share (EPS) and revenue for the coming quarters and years.

You may be able to get access to these research reports through your brokerage company or investment bank.

Despite analysts often being wrong, many institutional investors and regular investors use their ratings and reports when making investment decisions.

Because of this, the ratings and price targets from stock analysts often lead to big price movements in individual stocks.

Bottom Line: Stock analysts do extensive research on individual companies and provide recommendations to buy, sell, or hold their stocks. They also provide 12-month price targets, along with revenue and EPS projections.

What the most common analyst ratings mean

Many analysts like to keep things simple and only give buy, hold, or sell ratings:

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