what makes a company outperform 
an index is composed of securities from the same industry or of companies that have a similar size in terms of market capitalization any factor that helps a company generate proportionally more revenue and more profit than its peers in an industry grouping will see its share price appreciate faster this outperforming appreciation can happen for a variety of reasons excellent management decisions market preferences network connections or even luck any decisions made by senior management that help a company grow revenue and earnings faster than its competitors are highlighted as a sign of excellence these characteristics help the company build a reputation for being more likely to bring a new product to market quickly and capture more market share analysts identify these conditions and use them to forecast price appreciation for high performing companies for example if an investment fund uses the standard poor s 500 index as a benchmark and if the portfolio manager of that fund analyzes stocks with a market capitalization similar to securities in the index and forecasts that 15 particular stocks will generate a higher rate of earnings per share eps than the average for the index based on this analysis the mutual fund increases its holdings in the 15 stocks that are expected to outperform the index examples of analyst ratingsa rating is an analyst s opinion on the rate of return for a particular company s stock which includes the stock s price appreciation and dividends paid to shareholders the investment industry does not have a standard method that is used by all analysts to rate stocks a higher rating means that the stock s price will outperform similar companies over a specified period the most common use of outperform is for a rating that is above a neutral or a hold rating and below a strong buy rating outperform means that the company will produce a better rate of return than similar companies but the stock may not be the best performer in the index an analyst s performance is evaluated based on how stocks actually perform after a rating is assigned 