Some experts caution investors to assess target
prices carefully, since the underlying assumptions may not hold
true. To judge whether a target price is reasonable, you can read
the report for the analyst's evidence, looking in particular at
the reasoning behind P/E and earnings estimates. To see how well
a particular analyst has predicted performance in the past, you
can also review the analyst's track record, which compares the
analyst's recommendations and price targets to the stock's actual
performance.
Estimates like target price do tend to be more
reliable when they relate to companies with established track
records and relatively stable
P/E
ratios. Younger, smaller, less well-known companies tend to be
quite
volatile
in pricing, which makes it difficult for analysts to predict their
future value.
Sam Stovall,
Chief Investment Strategist at Standard & Poor’s
Sam Stovall, 
