Is Trending Stock ArcBest Corporation (ARCB) a buy it now?
ArcBest (ARCB) has been one of the most searched stocks on Zacks.com lately. So, you might want to consider some of the facts that could shape the stock’s performance in the short term.
Shares of this freight transportation and logistics company have returned +8.3% over the past month compared to the +4.7% change in the Zacks S&P 500 composite. The industry Zacks Transportation – Truck, at which belongs to ArcBest, gained 5.8% during this period. Now the key question is: where could the stock be heading in the near term?
While press releases or rumors about a substantial change in a company’s trading outlook usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
For the current quarter, ArcBest is expected to post earnings of $3.83 per share, indicating a +47.9% change from the prior year quarter. The Zacks consensus estimate has changed by +10.7% over the past 30 days.
The current year earnings consensus estimate of $14.36 indicates a year-over-year change of +68.5%. This estimate has changed by +5.8% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $12.40 indicates a -13.7% change from what ArcBest is expected to report a year ago. Over the past month, the estimate has changed by +3.5%.
With an impressive externally audited balance sheet, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance because it effectively harnesses the power of earnings estimate revisions. The magnitude of the recent change in the consensus estimate, plus three more factors related to earnings estimatesresulted in a Zacks Rank #2 (Buy) for ArcBest.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue growth forecasts
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
In the case of ArcBest, the consensus sales estimate of $1.37 billion for the current quarter indicates a year-over-year change of +35.1%. Estimates of $5.44 billion and $5.34 billion for the current and next fiscal year indicate variations of +36.7% and -1.9%, respectively.
Latest reported results and history of surprises
ArcBest posted revenue of $1.39 billion in the last quarter, representing a year-over-year change of +46.8%. EPS of $4.30 for the same period versus $1.97 a year ago.
Compared to the Zacks consensus estimate of $1.35 billion, reported revenue is a surprise +3.13%. Surprise EPS was +9.97%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.
ArcBest is rated A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the rating metrics that led to this rating.
The facts discussed here and plenty of other Zacks.com information might help determine whether it’s worth paying attention to the market buzz about ArcBest. However, its Zacks No. 2 ranking suggests it could outperform the broader market in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.