Definitions and Ratings
Our stock ratings are based on price expectations. We provide long- term ratings for an investment with specific time horizon, based on the long-term earnings outlook. We use long-term valuation methods to back-up our recommendations – discounted free cash flows, dividend discount models, price/earnings and price/book value multiples and Economic Value Added. Our stock recommendations are updated on a regular basis to reflect changing economic, market, sector and company conditions.
Take the example of a BUY rating, which we define as a stock that is expected to offer 16% return from current prices. A SELL recommendation is attached to a stock when we expect total return could be below-5%. Note the emphasis on the use of the term expected, which is meant to convey the inherent uncertainty, and hence risk, attached to forecasts. Our forecasts and recommendations, indeed those of any broker, are based on our best judgment as to the likely future performance of the market and individual stocks. We cannot guarantee actual outcomes. The underlying risk of equity investment can be mitigated, however, through carefully researched stock selection, and portfolio diversification.
Taurus Stock Rating System
Different securities firms use a variety of rating terms/systems to describe their recommendations. TSL employs a 3-tier rating mechanism i.e Buy, Hold and Sell, which is based upon the level of expected return for a specific stock. Similar rating terms used by other securities companies may not be equivalent to TSL rating system. When total return (capital gain + dividends) exceeds 15%, a Buy rating is assigned. A Sell rating is issued whenever total return is less than -5% and for return in between the 2 ranges, Hold rating is meted out. Time horizon is usually the annual financial reporting period of the company (unless otherwise mentioned in the report). Ratings are updated daily and can therefore change daily. They can change because of a move in the stock’s price, a change in the analyst’s estimate of the stock’s fair value, a change in the analyst’s assessment of a company’s business risk, or a combination of any of these factors.