What: Shares of food ingredient company Balchem (NASDAQ:BCPC) dropped as much as 10.7% Tuesday after the stock was downgraded by an analyst.
So what: Analysts at Sidoti cut Balchem's rating from buy to neutral Tuesday, but left the price target for the stock unchanged at $71 per share. On Feb. 29, the company reported fourth-quarter earnings results that showed an 18.4% drop in sales and a 17.7% decline in net income.
Now what: When an analyst changes their view of a stock, the news can send it swinging wildly higher or lower, but, long term, this is just noise for investors. Analysts on Wall Street typically aren't incentivized to make accurate stock picks, and historically, they don't beat the market. So there's no reason to panic over this move.
What will be important is to keep an eye on how Balchem's revenue and earnings trend in 2016, because that will be the true driver of the company's stock in the long term. The declining market conditions are expected to turn around this year, but if they don't, it may be time to reexamine the company's prospects.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Balchem. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.