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Broker recommendations can be a useful early clue when it comes to finding stocks to buy. But even company analysts can get things wrong, which means that when it comes to listening to these experts, it pays to explore the big picture...
Rather than relying on the trading recommendation of one analyst, a potentially better way of interpreting broker suggestions is to take note of the 'consensus' view of all the analysts covering the stock. That way you get an overall picture of what analysts think.
Take Essentra (LON:ESNT) as an example. Shares in the company have risen by 2.07% over the past month and they are currently trading at 321p. 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, Essentra currently has:
3 Buy recommendations
0 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 Essentra it's worth doing some investigation yourself. Indeed, we've identified some areas of concern with Essentra that you can find out about here.