The Fool School: Ratings and Targets

If you follow public companies in the news, you’ll frequently run across stories such as this: “Wingtip Investments raises rating for Pearls for Swine Barnyard Jewelry Co. (ticker: OINK) from ‘hold’ to ‘accumulate’ and sets 12-month target price of $80.”

That seems like very valuable information, but it’s not. At Fool HQ, we don’t pay much attention to analysts’ ratings such as “buy” or “outperform.” Thinking about them can make one’s head hurt. After all, how do you accumulate something if you don’t buy it? (It also strikes us as shady that very few analysts ever issue “sell” ratings. Could it be that they don’t want to tick off companies that might employ their firm in the future?)

Remember that price targets are just based on estimates, which may well prove to be too aggressive or too conservative.

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