Brokerage firms covering shares of Amira Nature Foods Ltd. (NYSE:ANFI) have given the stock a “Buy” rating on a consensus basis. Using the following ratings scale: 1.0 Strong Buy, 2.0 Buy, 3.0 Hold, 4.0 Sell and 5.0 Strong Sell, analysts have an average recommendation of 1.00 on the shares. Based on a recent trade, the shares are hovering around $5.50 which, according to analysts, yield significant upside potential to the $8.00 consensus target price.
Wall Street firms hire hundreds of analysts who provide recommendations on stocks. Typically, these analysts look at a company’s fundamentals, building financial models from this information in order to project future trends, specifically future earnings.
These projections are then used as a basis for providing “buy” or “sell” recommendations. Many investors consider these recommendations very seriously, and often times whenever an analyst changes their outlook on a stock, the price change almost immediately.
Analyst recommendations should be approached with caution for many reasons. Many times a conflict of interest arises due to the relationship between company that they work for and the company whose stock they are paid to track. Often, analysts are responsible for creating reports on companies that are currently or could potentially be a client of their employer. Analysts don’t want to offend any companies that could possibly be a potential client down the road, so they are inclined to put a positive spin on the stock.
Earnings estimates can also be manipulated, as the analysts are inclined to minimize them so that it increases the chances that a stock will “beat” the artificially lowered estimate in order to get inexperienced investors to buy.
Amira Nature Foods Ltd. (NYSE:ANFI)’s shares may have a significant upside to the consensus target of 8.00, but how has it been performing relative to the market? The stock’s price is 5.50 and their relative strength index (RSI) stands at 42.14. RSI is a technical oscillator that shows price strength by comparing upward and downward movements. It indicates oversold and overbought price levels for a stock.
Amira Nature Foods Ltd. (NYSE:ANFI) shares are moving 4.17% trading at $5.50 today.