Outperform
Candlefocus EditorAs an analyst rating, outperform is typically assigned a rating of 2 on a scale of 1 (best) to 5 (worst). This implies that the particular company or security outperforms its peers, but perhaps not by as wide of a margin as would be implied by a rating of 1.
Outperforming peers is typically determined by efficient use of resources in areas such as production and marketing. Companies that outperform typically have strategies that are better planned and better implemented than their peers, and are involved in activities that result in higher revenues, better margins and greater return on investments. For instance, a company may decide to invest in additional research and development efforts to ensure their products remain competitive in the marketplace.
In terms of a comparison of securities, outperform is used to describe the better performance of one security when compared to another. In such cases, the outperformance of one security generally is based on factors such as total return, earnings growth, and other financial metrics.
Overall, outperform is a useful term for financial professionals and investors for evaluating the performance of securities and comparing the relative performance of different companies. A rating or comparison of outperform indicates a higher level of performance relative to the peers, which can be interpreted as a sign of greater future potential from an individual security or company.