Outperform rating

Also known as: outperform, rated outperform, upgraded to outperform

An Outperform rating is an analyst recommendation that a stock is expected to beat a benchmark, such as its sector, the broad market or the analyst's coverage universe, over the rating horizon. It is the top tier on the Outperform/Market Perform (or Sector Perform)/Underperform scale used by many brokerages.

How it works

Like Overweight, Outperform is a relative call. Each firm's disclosures define the benchmark and, often, a return threshold. Some firms add tiers on either side, such as "Strong Outperform" or "Market Outperform", so the exact meaning depends on the firm's scale.

The market generally treats Outperform as equivalent to a Buy rating. Its opposite is Underperform, which corresponds to Sell or Underweight.

Why it matters for traders

What matters is the change and the context:

Upgrade to Outperform from Market Perform is a positive call and can move the stock, particularly for smaller companies with thin coverage.
Initiation at Outperform is common and usually less market-moving.
Price target. The implied upside shows how strong the conviction is.
Relative framing. In a sector sell-off, an Outperform stock may still fall, just less than peers.

Example

An analyst upgrades a hypothetical railroad, Ironline Transport (IRLT), from Market Perform to Outperform and raises the target from $150 to $175. With IRLT at $152, the new target implies about 15% upside ($23 / $152). The note expects volume recovery to help IRLT beat the transport group.

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Related terms

Overweight ratingAn analyst rating meaning a stock is expected to beat its sector or benchmark, so investors should hold more of it than its index weight; similar to Buy.Buy ratingAn analyst recommendation that a stock is expected to outperform or deliver meaningful positive returns over the rating horizon, usually 12 months.Hold ratingA neutral analyst recommendation that a stock is expected to perform roughly in line with the market or its sector, without a clear reason to buy or sell.Underweight ratingAn analyst rating meaning a stock is expected to lag its sector or benchmark, so investors should hold less of it than its index weight; similar to Sell.Analyst upgradeA sell-side analyst's move to a more favorable rating on a stock, such as from Hold to Buy, usually published with a new price target and thesis.Price targetAn analyst's estimate of where a stock will trade at a future point, usually 12 months out, used with a rating to show expected upside or downside.

Part of the Quantisnow financial glossary. For longer explainers, see the investing guides. Educational content, not investment advice.