Investors commonly heed recommendations from Wall Street analysts when evaluating stocks. When it comes to Jabil (JBL), what do these ratings mean and should you consider them before making a move?
Are Broker Recommendations Trustworthy?
Jabil has an average brokerage recommendation (ABR) of 1.29, hovering between Strong Buy and Buy. Within these stats, 85.7% of the seven recommendations are Strong Buy.
Before jumping at these figures, consider whether brokerage recommendations truly guide investors. Numerous studies have pointed out the limited success of brokerage advice in identifying stocks with the highest potential for appreciation.
What’s the catch? Analysts at brokerage firms tend to favor a stock they cover, resulting in biased positive ratings. For example, the ratio of “Strong Buy” to “Strong Sell” recommendations is skewed at five to one, reflecting the analysts’ predisposition.
Zacks Rank vs. ABR
Zacks Rank, a tool with a proven track record, labels stocks from Strong Buy to Strong Sell based on earnings estimate revisions. While ABR relies solely on brokerage recommendations, Zacks Rank uses a quantitative model driven by earnings estimates.
Unlike the ABR, Zacks Rank is based on fresh data and maintains a balance among its five ranks. It’s crucial to distinguish between these measures and not conflate their significance.
Investing in JBL
Jabil’s Zacks Consensus Estimate for the current year remains stagnant at $9.11, indicating analysts’ stable views on the company’s earnings prospects. This stability contributes to Jabil’s Zacks Rank #3 (Hold).
Considering these factors, exercising caution with the Buy-equivalent ABR for Jabil may be wise.