Outperform is a type of rating which is public analyst use and it is a term of financial news and media.
Whenever a stock rating is ” Outperform ” from ” market perform ” or ” Underperform “, it shows that stock may give huge return in forseeable future.
You can also use the term ” Outeperform ” while comparing two securities to describe which one may have better return . Usually in market analysis, the securities which is going to have higher EPS and having similar market cap then the securities in benchmark index is outperforming.
Most commonly an investment in a particular company is compared with a market benchmark such as S&P 500. If the investment gave higher returns then the benchmark, it is outperforming the market.
Keypoints from the blog
- Quick takeaways from Outperform
- How companies outperform?
- Example of the concept
1. Quick takeaways from Outperform
- Outperform is a type of analyst rating
- A term which shows which amongst the two securities may have an increase in the earning per share and help investors get more benefits.
- Companies usually outperform their peers when they manage their production and marketing efforts more efficiently.
2. How companies outperform?
An index is composed of multiple securities from the same industry or companies with different market capitalizations.
Any factor or strategy which may lead the company towards higher profit margins and more revenue is always beneficial. The growth in stock price of a particular securities is the outside appreciation which company is getting from market.
- Good management decisions
- Market survey
- Network and connections etc
Any decision or strategy which is prepared by seniors or management team which overall lead to more significant performance is a changing factor.
These characteristics helps build the company’s reputation, improves the chances of introducing new product in market and capture more market share.
3. Example of the concept
Let’s imagine an investment fund uses S&P 500 index as the market benchmark. If the fund holders list out a few stocks whose market cap is similar to that of the securities in the index and forcast that these many stocks can have higher earning per share than average in the index. Mutual fund increases their holding in those stocks with that analysis.
Hope you got to learn the best from performance of the stock , Stay tuned for more upcoming informational blogs.