Should You Buy Crocs (CROX)? Wall Street Bulls Think So.

Investors commonly use Wall Street analyst recommendations to buy, sell, or hold a stock. Though media headlines concerning brokerage-firm-employed (or sell-side) analysts' rating revisions affect stock prices, do they matter? We'll start with these Wall Street giants' opinions on Crocs (CROX) before discussing brokerage recommendations' dependability and how to use them.

Based on 11 brokerage firms' buy, hold, sell, etc. recommendations, Crocs has an average brokerage recommendation (ABR) of 1.55, on a scale of 1 to 5 (Strong Buy to Strong Sell). Strong Buy and Buy are similar to 1.55 ABR. Eight of 11 ABR ratings are Strong Buy, 72.7% of all recommendations.

Although the ABR recommends buying Crocs, this may not be enough to make an investing choice. Several studies have demonstrated that brokerage suggestions rarely help investors choose equities with the greatest price growth potential.

Do you wonder why? The vested interest of brokerage firms in a company they cover sometimes biases analysts' ratings positively. Our analysis demonstrates that brokerage firms offer five "Strong Buy" recommendations for every "Strong Sell" recommendation.

Their interests aren't necessarily aligned with individual investors, thus they rarely predict stock prices. Therefore, this information may be best used to validate your own research or a highly successful stock price prediction indicator.

With an exceptional independently verified track record, our proprietary stock grading tool, the Zacks Rank, separates stocks into five groups from #1 (Strong Buy) to #5 (Strong Sell) and predicts near-term price performance. Thus, confirming the Zacks Rank using ABR may help make a winning investment.

Although Zacks Rank and ABR both range from 1 to 5, they are distinct.  Only broker recommendations are used to calculate the ABR, which is expressed in decimals like 1.28. But the Zacks Rank is a mathematical formula that uses earnings forecast revisions. Displayed in full numerals 1–5.

Brokerage firm analysts continue to overestimate their recommendations. Due of their employers' vested interest, these analysts often deceive investors with more favorable recommendations than their research would justify.

However, profit estimate changes drive the Zacks Rank. And empirical research demonstrates a high association between earnings estimate revisions and near-term stock price changes. All equities with brokerage analysts' current-year profit projections receive proportional Zacks Rank grades. This gadget always balances its five ranks.

Freshness distinguishes the ABR from Zacks Rank. When seen, the ABR may be outdated. However, brokerage analysts constantly revise their earnings projections to account for a company's shifting business patterns, and the Zacks Rank rapidly reflects their actions, so it always predicts future price moves.

The Zacks Consensus Estimate for Crocs for the current year has grown 4.4% to $12.38 in the past month. As analysts agree to raise EPS predictions, the stock may rise in the near term due to their increased optimism about the company's profits potential.


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