Castlight Health Inc. (CSLT Quick QuoteCSLT - Free Report) is set to report fourth-quarter fiscal 2016 results on Feb 15. Last quarter, the company reported a positive earnings surprise of 28.57%. Moreover, excluding stock-based compensation, loss of 11 cents per share was much narrower than loss of 21 cents reported in the year-ago quarter.

The improvement was primarily driven by 31% growth in revenues, which totaled $25.5 million and was slightly ahead of the Zacks Consensus Estimate. We note that Castlight has beaten the consensus revenue estimates in three of the last four trailing quarters.

Moreover, Castlight’s earnings have beaten the Zacks Consensus Estimate in the four trailing quarters, with an average positive surprise of 14.61%.
 

However, the stock has underperformed the Zacks Internet Software industry in the last one year. While the stock has gained 18.4%, the industry returned 26.5% in the same period.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Castlight’s cloud-based software platform enables enterprises to gain control over their rapidly escalating health care costs. In fact, the company has rapidly reduced operating expenditure that drove the improvement in the loss figure reported in the third quarter. We believe that stringent cost control will continue to improve the bottom line.

Furthermore, significant investments in growth areas for improving implementation timelines are positive. The company’s platform has been selected by the likes of CSM Bakery, HUB International and more recently by the George Washington University. The growing customer base is positive for the company.

Earnings Whispers

However, our proven model does not conclusively show that Castlight will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. As you will see below, that is not the case here.

Zacks ESP: The, Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are peged at a loss of 11 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Castlight has a Zacks Rank #3, which when combined with an Earnings ESP 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are couple of stocks that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Applied Optoelectronics Inc. (AAOI Quick QuoteAAOI - Free Report) with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ARRIS International plc with an Earnings ESP of +1.56% and a Zacks Rank #2.

GoDaddy (GDDY Quick QuoteGDDY - Free Report) with an Earnings ESP of +12.50% and a Zacks Rank #3.
 

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>