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Bull Of The Day: Advanced Drainage (WMS)

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Advanced Drainage Systems (WMS - Free Report) is a Zacks Rank #1 (Strong Buy) and it sports the growth divergence that I love to see. I see a D for Value and an A for Growth and right away I know that I am on the right path. Let's take a deeper look at this stock as it is the Bull of the Day.

This building products name is very strong here, one of the names that continues to pop up on the list of new 52 week highs. This is what I have been talking about in the newsletter services I run -- sticking with the winners.

Earnings History

The earnings history isn’t that good here. But we don’t buy stocks based on the earnings history. This stock has missed 3 of the last 4 quarters, but the most recent report was a beat of the Zacks Consensus Estimate.

The most recent report was the lone beat and it was a big one. The company reported $0.83 in EPS when $0.65 was expected. That 18 cent beat translates into a positive earnings surprise of 27%.

Estimate Revisions

I see a slew of positive earnings estimate revisions.

This quarter as moved from 78 cents to 97 cents over the last 30 days.

Next quarter has more than tripled, moving from 11 cents to 37 cents.

The full year numbers has jumped from $1.53 to $2.43

Next year is looking good too, moving from $1.43 to $2.34.

I would expect next year to show some earnings growth after the next report as there will be better visibility.


So there is an issue here, I see the forward PE at 23x which is not terrible. The 6.6x book multiple is the issue. That is a lot even for a name like this that is growing at 23% on the topline. The 2.2x sales is a good spot to be at and margins are headed in the right direction.

Operating margins went from 3.45% to 5.7% and that is just what we like to see. Net margins have moved from -11% to 5.71% again, just what we like to see.


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