A stock is said to underperform if it produces a worse return than an index or the overall stock market, and analysts can give stocks an "underperform" rating if inferior performance is expected. For example, if a stock's total return is 5% and the S&P 500's total return is 8%, it underperformed the index by three percentage points.
What does market underperform mean for a stock?
Some analysts use "market underperform," while others will rate a stock a "sell" or even as a "strong sell" depending on how great the underperformance is expected to be. This article is part of The Motley Fool's Knowledge Center, which was created based on the collected wisdom of a fantastic community of investors.
What does it mean when an analyst assigns a stock underperform rating?
A specific stock is assigned an underperform rating by an analyst if there are concerns that shares will not keep pace with others for various reasons, but those worries do not warrant an outright sell rating.
What does underperform mean?
Underperform is a stock that will likely perform slightly below par: seeing greater losses in a down market and below-average gains in an up market. A sell rating is given to a stock that is expected to lose value.
How do you know if a stock outperforms?
A stock outperforms if its return is higher than that of an index or another stock. A stock is said to outperform if it produces a higher return than an index or the overall stock market, and analysts give stocks an outperform rating if superior performance is expected. For example, if a stock's total return is 10%, ...
What does underperformed mean?
Definition of underperform transitive verb. : to do worse than. intransitive verb. : to fail to do as well as expected.
Should I sell underperforming stocks?
Generally though, if the stock breaks a technical marker or the company is not performing well, it is better to sell at a small loss than to let the position tie up your money and potentially fall even further.
What makes a stock price plummet?
Stock prices can drop for various reasons, and sometimes the decline is caused by a combination of factors. Those can include newly released earnings reports, negative company news, and changes in implicit value, explicit value and supply and demand for the stock.
What is an underperform rating for a stock?
Underperform: A recommendation that means a stock is expected to do slightly worse than the overall stock market return. Underperform can also be expressed as "moderate sell," "weak hold," and "underweight."
Do I owe money if my stock goes down?
If you invest in stocks with a cash account, you will not owe money if a stock goes down in value. The value of your investment will decrease, but you will not owe money. If you buy stock using borrowed money, you will owe money no matter which way the stock price goes because you have to repay the loan.
When should you pull out of a stock?
It really depends on a number of factors, such as the kind of stock, your risk tolerance, investment objectives, amount of investment capital, etc. If the stock is a speculative one and plunging because of a permanent change in its outlook, then it might be advisable to sell it.
Where does stock crash money go?
When a stock tumbles and an investor loses money, the money doesn't get redistributed to someone else. Essentially, it has disappeared into thin air, reflecting dwindling investor interest and a decline in investor perception of the stock.
What happens if no one sells a stock?
When there are no buyers, you can't sell your shares—you'll be stuck with them until there is some buying interest from other investors. A buyer could pop in a few seconds, or it could take minutes, days, or even weeks in the case of very thinly traded stocks.
What happens if a stock goes lower than what you bought it for?
So, no matter how much the value of your stock has dropped, nothing happens to affect your taxes until you sell your shares. Until then, it's just an unrealized loss.
Is outperform better than buy?
Examples of Analyst Ratings The most common use of outperform is for a rating that is above a neutral or a hold rating and below a strong buy rating. Outperform means that the company will produce a better rate of return than similar companies, but the stock may not be the best performer in the index.
Is an overweight stock good?
If analysts give a stock an overweight rating, they expect the stock to outperform its industry in the market. Analysts may give a stock an overweight recommendation due to a steady stream of positive news, good earnings, and raised guidance.
How accurate are Robinhood analyst ratings?
Robinhood analyst ratings are stock ratings from Wall Street analysts averaged out and intended to quickly show the expected performance of a particular stock over a given time period. As a general rule, Robinhood analyst ratings should be trusted, but only when used in addition to more in-depth research.
What does it mean to underperform a stock?
In a rising market, for example, a stock is underperforming if it is not experiencing gains equal to or greater to the advance in the S&P 500 Index. In a down market, a stock that is a falling faster than the broader market is an underperformer. "Underperform" is also an analyst recommendation assigned to a stock when shares are expected ...
What does it mean when a stock is underperforming?
In a rising market, for example, a stock is underperforming if it is not experiencing gains equal to or greater to the advance in the S&P 500 Index. In a down market, a stock that is a falling faster than the broader market is an underperformer. "Underperform" is also an analyst recommendation assigned to a stock when shares are expected to do slightly worse than the market return. The designation is also known as market "moderate sell" or "weak hold."
What does "underperform" mean in stock?
Underperform is a stock that will likely perform slightly below par: seeing greater losses in a down market and below-average gains in an up market.
Why do stocks underperform?
There are a number of reasons why a stock might receive an underperform rating, but most of the time, it comes as the result of comparing company metrics to those of peers or the overall market.
What is underpeform rating?
The underpeform rating can have varying meanings depending the brokerage firms issuing the rating; it is sometimes called a weak hold or moderate sell.
What does "strong sell" mean?
Strong sell reflects concerns that the company is in deep trouble and the stock could suffer substantial losses.
Is an industry underperforming?
An industry might be described as underperforming. For example, the utilities industry might receive this designation because the growth of economy may boost the industry yet inflation could result in higher interest rates, which would be a negative for the utility sector. Similarly, the real estate market might have seen low interest rates drive investment in Real Estate Investment Trusts, but rising rates can change that dynamic. Those factors could create a circumstance where an industry is not generating returns to the full potential and an underperform rating is warranted.
What does it mean when a stock is underperform?
The term “underperform” is usually used to refer to a stock that is fundamentally stable, but is expected to perform below expectations when comparing it to the market or industry to which the security or stock belongs to. It should be noted that when a security receives an “underperform” designation, it does not mean that the stock needs to be sold; rather, it simply means that the stock is not expected to keep pace with the overall market or industry.
Why are stocks underperforming?
One reason is that growth is slowing down compared to previous quarters, with analysts thinking the downward trend might continue into the future .
What is underperformance in stock market?
In the financial world, underperformance occurs when a stock’s valuation or return is doing worse in comparison to the overall market return or the expected return. . If the overall market is rising, a stock underperforms by not experiencing gains in share price equal to or greater than the overall gain in the market.
What does "underperforming" mean?
What Does Underperforming Mean? In a general sense, underperforming refers to performing poorly or unsatisfactorily in comparison to expectations or when evaluated against a certain standard.
What does "sell" mean in stocks?
Sell – Assigned to stocks that are expected to lose value and as such, the analysts are recommending that investors who own such stocks sell them
What is the stock index?
Stock Market Index A stock market index, also known as a stock index, measures a section of the stock market. In other words, the index measures the change in
What is a broker?
A broker is an intermediary who. , private clients, or for investment publications that intend on making their findings public through reports. The analysts evaluate the financial conditions of a security using information available about the industry, and based on their analysis, a stock can be ranked or rated.
What does it mean when a stock outperforms?
A stock outperforms if its return is higher than that of an index or another stock. A stock is said to outperform if it produces a higher return than an index or the overall stock market, and analysts give stocks an outperform rating if superior performance is expected.
Why would a stock outperform the market?
Just to name a few: The company's sales or earnings could grow faster than expected. The stock was undervalued, and has now rebounded.
What is outperformance in stocks?
Outperformance can also refer to a stock's return in relation to its peers, or even to another individual stock. For example, so far in 2016, Wal-Mart has produced a total return of more than 19%, while Costco has produced a 1.4% loss. We can say that Wal-Mart has outperformed Costco so far this year.
What is the rating of outperform?
For starters, the rating of outperform is also called market outperform, overweight, or simply, buy. Some brokerages have an additional rating called strong buy, which is indicative of a stock that is expected to outperform the market by a wide margin.
What does it mean to outperform a stock?
Outperform means that the company will produce a better rate of return than similar companies, but the stock may not be the best performer in the index.
What does "outperform" mean in financial news?
What Does Outperform Mean? In financial news media outperform is commonly used as a rating given by analysts who publicly research and recommend securities.
What does it mean when a portfolio manager picks stocks that outperform the benchmark?
If a portfolio manager consistently picks stocks that outperform the benchmark, the investment fund they work for will produce a higher rate of return and those in the financial media will take notice. Money managers are ranked based on the portfolio rate of return and how those returns compare to the benchmark.
What does "outperform" mean?
Another use of the term is simply as a comparison of performance between two securities: the better of the two outperforms the other.
When do companies outperform their peers?
Companies typically outperform their peers when they manage their production and marketing efforts more efficiently.
What is rating in stock market?
A rating is an analyst’s opinion on the rate of return for a particular company’s stock, which includes the stock’s price appreciation and dividends paid to shareholders . The investment industry does not have a standard method that is used by all analysts to rate stocks.
What does it mean when a product isn't selling?
If a product isn’t selling, it’s not performing. Low sales figures are the first indicator of a badly performing product. It means that no one is currently interested in buying your product, for whatever reason, which affects your cash flow and is a drain on your warehousing costs.
Can a disastrous purchase be turned into a positive experience?
Solving any customer issues quickly and satisfactorily – a disastrous purchase can be turned into a positive experience with a little care and attention.
Can you admit a poorly performing product?
It can be hard to admit that you have a poorly performing product, especially if you thought this particular product was going to be a winner. But with your store’s reputation and profits on the line, quickly identifying a losing product is crucial for your success. Specifically, you should keep an eye out for:
Is an item underperforming?
But, just because a product is selling, doesn’t mean it’s performing. If an item’s high sales figures are driven by high marketing costs or low product prices, which negates your profit, the item is underperforming.
