Wall Street Analysts Weigh In on Vistra Corp: A Stock Worth Considering?
Before deciding whether to buy, sell, or hold a stock, investors often consult Wall Street analysts. Their ratings can influence stock prices, but how much should you trust these recommendations?
Let’s examine what analysts think about Vistra Corp. (VST) and whether these brokerage recommendations are reliable tools for investors.
Vistra holds an average brokerage recommendation (ABR) of 1.17, which is on a scale of 1 to 5 (from Strong Buy to Strong Sell). This rating is based on input from 12 brokerage firms and suggests a preference between Strong Buy and Buy.
Of the 12 recommendations, 11 are classified as Strong Buy, indicating 91.7% of analysts support a purchase.
Trends in Brokerage Recommendations for VST
Explore Vistra’s price target and stock forecast here>>>
While the ABR indicates a recommendation to buy Vistra, relying solely on this number may not be wise. Research shows that brokerage recommendations often do not effectively guide investors towards stocks with the best potential for price increases.
One reason for this is that brokerage firms typically have vested interests in the stocks they cover. Analysts may display a positive bias in their ratings. Our findings reveal that for every “Strong Sell” recommendation, there are five “Strong Buy” ratings.
This misalignment of interests can mislead retail investors about potential stock pricing. Thus, use these recommendations to validate your own research or as an indicator alongside more reliable prediction tools.
One such tool is the Zacks Rank, known for its accurate track record. This proprietary rating system categorizes stocks from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell) based on earnings estimate revisions. Validating the Zacks Rank with ABR can lead to more informed investment choices.
Differentiating ABR from Zacks Rank
Despite both measures using a scale from 1 to 5, it is important to grasp that ABR and Zacks Rank assess different aspects.
The ABR is solely based on broker recommendations, and is often expressed in decimals (e.g., 1.28). In contrast, the Zacks Rank is a quantitative measurement based on earnings estimate revisions, represented in whole numbers.
Brokerage analysts often maintain an optimistic outlook on recommendations. Their favorable ratings often exceed what their research would suggest, leading to frequent misguidance for investors.
On the flip side, the Zacks Rank relies on timely earnings revisions, directly correlating with stock price movements, according to research.
Additionally, Zacks Rank grades are consistently applied across all stocks for which analysts provide earnings estimates, ensuring balance within its ranking system.
The freshness of the information is also a crucial difference. While the ABR may not reflect the latest recommendations, revisions in earnings estimates are quickly incorporated into the Zacks Rank, providing an up-to-date gauge of potential future price movements.
Should You Invest in VST?
Considering the earnings estimate revisions for Vistra, the Zacks Consensus Estimate for the current year has risen by 4.3% over the last month to $7.
Analysts are increasingly optimistic about the company’s earnings, as shown by their agreements to revise EPS estimates upward. This positive sentiment could indicate that the stock is poised for growth in the near future.
The magnitude of this change in the consensus estimate, alongside three additional factors related to earnings, has led to a Zacks Rank of #2 (Buy) for Vistra. For a full list of today’s Zacks Rank #1 (Strong Buy) stocks, you can check here>>>>
Consequently, the ABR for Vistra can serve as a helpful tool for investors when making decisions.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
