Is It Worth Investing in Core & Main Based on Wall Street's Bullish Views？ - Core & Main (NYSE:CNM)

　　Are you wondering why？ The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every “Strong Sell” recommendation, brokerage firms assign five “Strong Buy” recommendations.

　　This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

　　Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is an effective indicator of a stock's price performance in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.

　　Zacks Rank Should Not Be Confused With ABR

　　In spite of the fact that Zacks Rank and ABR both appear on a scale from 1 to 5, they are two completely different measures.

　　Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.

　　Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

　　In contrast, the Zacks Rank is driven by earnings estimate revisions. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research.

　　In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

　　There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.

　　Is CNM Worth Investing In？

　　In terms of earnings estimate revisions for Core & Main, the Zacks Consensus Estimate for the current year has declined 10.4% over the past month to $2.32.

　　Analysts' growing pessimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates lower, could be a legitimate reason for the stock to plunge in the near term.

　　The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #4 (Sell) for Core & Main.

　　Therefore, it could be wise to take the Buy-equivalent ABR for Core & Main with a grain of salt.

　　© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.