what is underperform 
if an investment is underperforming it is not keeping pace with other securities in a rising market for example a stock is underperforming if it is not experiencing gains equal to or greater to the advance in the s p 500 index in a down market a stock that is a falling faster than the broader market is an underperformer underperform is also an analyst recommendation assigned to a stock when shares are expected to do slightly worse than the market return the designation is also known as market moderate sell or weak hold understanding the underperform designationexact definitions vary between brokerages but an underperform rating is worse in general than neutral but better than sell or strong sell a security might receive the underperform designation if it does not meet or exceed a metric it is being compared against the comparison might be against the overall market a competing company or an index a variety of other issues could bring the underperform rating such as concerns about the company s debt levels price to earnings ratios or loss of market share examples of underperform ratingan industry might be described as underperforming for example the utilities industry might receive this designation because the growth of economy may boost the industry yet inflation could result in higher interest rates which would be a negative for the utility sector similarly the real estate market might have seen low interest rates drive investment in real estate investment trusts but rising rates can change that dynamic those factors could create a circumstance where an industry is not generating returns to the full potential and an underperform rating is warranted a specific stock is assigned an underperform rating by an analyst if there are concerns that shares will not keep pace with others for various reasons but those worries do not warrant an outright sell rating for example though a company sees growth or positive earnings for a quarter or for the year those returns might not be on a par with the market so if an automobile manufacturer reports a total return of 12 for its fiscal year while the s p 500 sees a 23 total return for that year the auto manufacturer could be classified as underperform depending on the brokerage house an outlook rating of underperform can have different degrees of meaning at charles schwab for instance an outlook of underperform also carries a sell guidance if a company receives a strongly underperform outlook from the firm it will also receive the sell guidance 1 these ratings can mean there is an expectation that the stocks will not meet benchmarks 