'Buy' and 'sell' recommendations from company analysts often catch the attention of investors - but it's worth remembering that city experts can get things wrong. So rather than relying on just one recommendation, a potentially better way of interpreting broker 'recs' is to take note of the 'consensus' - or average - view of all the analysts covering the stock. That way you get an overall picture of what analysts think.
Take Melrose Industries (LON:MRO) as an example. Shares in the company have risen by 10.5% over the past month and they are currently trading at 126p. But what do the analysts that cover the company think?
Based on the broker 'consensus', there could be reasons to believe that the positive recent trend will continue. In terms of trading recommendations, Melrose Industries currently has:
5 Buy recommendations
3 Hold recommendations
0 Sell recommendations
This suggests that analysts are generally upbeat about the outlook.
While analyst forecasts can be a useful guide to what City 'experts' think about a stock's near term future, they can be unreliable. To get a better idea about the strengths and weaknesses of Melrose Industries it's worth doing some investigation yourself. Indeed, we've identified some areas of concern with Melrose Industries that you can find out about here.