It came to mind while reading that linked article that Inderes’ policy is not to be ‘neutral’, ‘hold’, ‘market perform’, ‘equal weight’ or similar.
Without checking the practices of other analysis houses, in Neste’s case, at least 8/19 have arrived at a ‘neutral’-like verbal assessment, meaning 5 recommendation levels seems to be a fairly common practice.
Of course, one can generally question the sense of these verbal assessments at all, because stock prices live every moment. Whereas the numerical target created by an analysis house is ultimately the concrete chosen estimate, and based on which the verbal assessment is formed.
But to the point: in my opinion, Inderes’ principle of not being neutral is wrong in the sense that, when compared to other firms, it uses a different scale, and
- When calculating consensuses, it takes a different stance than the 5-tiered basic model (Buy, Add, Hold, Reduce, Sell)
- For monitored companies, the verbal assessment lacks a midpoint, and readers of the world’s news clutter get a different impression when Inderes’ assessment falls in the middle compared to other analysis houses. This doesn’t always matter, but it clearly has significant importance for smaller firms - if Inderes is even the only analysis house monitoring them - the practical difference and verbal message are significantly emphasized.
Well, one can of course say that the numerical target would just be a secondary guide from many scenarios, but the verbal assessment is nevertheless based on the deviation of the stock price from the numerical target at a given moment - i.e., at the time of writing the analysis.
I myself would, appealing to commensurability, welcome back the fifth step, as well as bull & bear scenarios with some level of confidence to complement the numerical target.
https://forum.inderes.com/t/neste-ilmastonmuutostaistelun-eturivissa/252/3622?u=opa
vara-services.com/neste/ https://share.google/WJeK9YVHBRj0PnT4Y