Investors commonly use Wall Street analyst recommendations to buy, sell, or hold a stock. Though media headlines concerning brokerage-firm-employed (or sell-side) analysts' rating revisions affect stock prices, do they matter? Let's explore what Wall Street heavyweights say about Griffon (GFF) before discussing brokerage recommendations' credibility and how to use them.
Griffon's average brokerage recommendation (ABR) is 1.00 on a scale of 1 to 5 (Strong Buy to Strong Sell), based on four brokerage firms' buy, hold, sell, etc. recommendations. ABR 1.00 signifies Strong Buy. Four Strong Buy ratings make up the current ABR, 100% of all recommendations.
The ABR advises buying Griffon, but this alone should not be used to invest. Brokerage suggestions rarely help investors identify stocks with the greatest price appreciation potential, according to many research.
The vested interest of brokerage firms in a company they cover sometimes biases analysts' ratings positively. Our analysis demonstrates that brokerage firms offer five "Strong Buy" recommendations for every "Strong Sell" recommendation
Their interests aren't necessarily aligned with individual investors, thus they rarely predict stock prices. Therefore, this information may be best used to validate your own research or a highly successful stock price prediction indicator.
Our unique stock grading engine, Zacks Rank, which has an exceptional externally verified track record, divides stocks into five groups, from #1 (Strong Buy) to #5 (Strong Sell), and predicts future stock price performance. Thus, using the ABR to validate the Zacks Rank may help you make a winning investment.
Although Zacks Rank and ABR both range from 1 to 5, they are distinct. Only brokerage recommendations determine the ABR, which is displayed with decimals (e.g., 1.28). However, the quantitative Zacks Rank lets investors leverage earnings estimate revisions. Displayed in full numerals 1–5.
Brokerage analysts consistently overestimate their recommendations. Due to their employers' financial interests, these analysts give investors more positive evaluations than their research supports, misguiding them more often than assisting them.
However, profit estimate changes drive the Zacks Rank. And empirical research demonstrates a high association between earnings estimate revisions and near-term stock price changes. The three Zacks Rank grades are applied proportionally to all equities for which brokerage analysts anticipate current-year earnings. Thus, this tool always balances its five ranks.
Freshness distinguishes the ABR from Zacks Rank. When seen, the ABR may be outdated. However, brokerage analysts constantly revise their earnings projections to account for a company's shifting business patterns, and the Zacks Rank rapidly reflects their actions, so it always predicts future price moves.
Over the past month, Griffon's Zacks Consensus Estimate for the current year rose 3.9% to $4.80. As analysts agree to raise EPS predictions, the stock may rise in the near term due to their increased optimism about the company's profits potential.
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