Question 1

What is a price target for a stock?

Accepted Answer

It is the price an analyst estimates the stock will trade at over a horizon of roughly twelve months. It comes from a valuation model with assumptions about growth, margins and discount rate, so different analysts arrive at very different numbers for the same company.

Question 2

What does analyst consensus mean?

Accepted Answer

It is the summary of recommendations from all analysts covering the stock, usually expressed as buy, hold or sell. It is worth reading knowing that sell ratings are uncommon and that revisions tend to arrive after the price move rather than before it.

Question 3

What is an EPS surprise?

Accepted Answer

It is the difference between the earnings per share a company reported and what analysts expected. It is what moves the price on results day: a company can post record earnings and still fall if the market was expecting a bigger number.

Question 4

Is it worth watching what insiders buy?

Accepted Answer

Purchases carry more information than sales. An executive sells for many reasons unrelated to their view of the company, such as paying taxes or diversifying their wealth, while a meaningful purchase with their own money admits far fewer explanations. In no case is it a sufficient signal on its own.