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Tale of the Tape

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Capstone Turbine Corp. , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #5 (Strong Sell) further confirms weakness in CPST.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 3 estimates moving down in the past 60 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from 1 cent a share a month ago to its current level of a loss of 2 cents.

Also, for the current quarter, Capstone Turbine has seen 2 downward estimates revision versus no upward revision in the opposite direction, dragging the consensus estimate down to a loss of 1 cent a share from breakeven over the past 60 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 10.2% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Electrical Machines sector, you may instead consider some better-ranked stocks including EnerSys , Emerson Electric Co. and Franklin Electric Co., Inc. . While EnerSys holds a Zacks Rank #1 (Strong Buy), Emerson Electric and Franklin Electric hold a Zacks Rank #2 (Buy) and may be better selections at this time.

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