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Firm XYZ ia very poorly run. On a scale of 1(worst) to 10(best), you would give...

Firm XYZ ia very poorly run. On a scale of 1(worst) to 10(best), you would give it a score of 3. The market consensus evaluation is that the management score is only 2. Should you buy or sell the stock?

The solution answer is to buy because general opinion is not bad compared to 'my' assessment. But I can't understand this because I thought that general opinion(2) is closer to worst whereas my opinion(3) is rather closer to best compared to 2.

Please let me know why... :(

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Answer:

You should buy the stock.

Because, the firm is undervalued by the market (pessimistic rating of only 2 by the market consensus). However you feel optimistic of the management score by giving it a score of 3

If the it had been reverse, you giving a rating of 2 and the market giving a score of 3, you would feel the market is overvalued and hence you will sell the stock

Here your analysis matters the most as you compare the performance of the company based on your score with the market score and hence feel overvalued or undervalued and take a decision.

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