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Anatomy of Success: Nutanix (NTNX)

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The Zacks Rank is a proven stock-picking system that helps both beginning and experienced investors find strong companies at any given moment. The model emphasizes earnings estimates and estimate revisions, discovering stocks of all shapes and sizes that are displaying the characteristics we look for in a market-beating company.

When a particular company earns the desired Zacks Rank #1 (Strong Buy), it is on track to provide remarkable returns over the next one to three months. But achieving this ideal rank is no simple task, and of the thousands of companies tracked by Zacks, only about 5% earn this designation.

In the story below, you will learn about one specific company that helped show the strength of the Zacks Rank. If investors had followed our ranking system when it flagged this cloud computing growth pick, they would have witnessed significant profits.

Nutanix, Inc. (NTNX - Free Report)

Nutanix provides an enterprise cloud platform which converges silos of server, virtualization, and storage into integrated solutions and connections to public cloud services. The company sells what it calls hyper-converged infrastructure appliances and software-defined storage. Nutanix was founded in 2009 and has attracted significant attention since its IPO in 2016.

Nutanix raised about $230 million during its popular initial offering on Sep. 30, 2016. But the firm really started to garner believers after stringing together a series of positive earnings reports in the second half of 2017. These results helped the stock generate strong momentum and earn great Zacks Ranks.

Notably, NTNX became a Zacks Rank #2 (Buy) on Sep. 8, 2017. This ranking came on the back of a great earnings announcement just one week earlier. Nutanix reported an adjusted loss of 33 cents per share, beating the Zacks Consensus Estimate of -$0.38. Total revenues were $226 million, ahead of our consensus estimate of $216 million and up 17.7% quarter over quarter. These remarkable figures inspired analysts to become more bullish on the stock, which likely helped NTNX pop up on the Zacks Rank radar.

Nutanix would remain a #2 (Buy) for five weeks before an even-stronger earnings outlook moved the company up to a Zacks Rank #1 (Strong Buy) on Oct. 17, 2017. The cloud computing firm would stay on our #1 (Strong Buy) list for three weeks, never dipping below a #3 (Hold) over the next month and a half ahead of its new quarterly earnings announcement.

On Nov. 30, Nutanix reported an adjusted earnings loss of 16 cents per share, soaring past the Zacks Consensus Estimate of a loss of 26 cents per share. Meanwhile, the company saw revenue figures of $276 million, beating our consensus estimate of $267 million and growing 46% year over year. Nutanix also saw continued customer growth and ended the quarter with 7,813 end customers.

Nutanix would once again earn the Zacks Rank #2 (Buy) designation one week after the report. Since then, the stock has never been lower than a #3 (Hold), and its share price and earnings outlook momentum has remained strong.

The below chart demonstrates the price performance for NTNX and 12-month forward looking EPS estimate (in red), starting from the time the stock first earned a Zacks Rank #1 (Strong Buy).

 

As we can see, NTNX has been a huge winner for those that followed the Zacks Rank. The stock is currently up about 100% since earning a Zacks Rank #1 (Strong Buy) last year. Investors should know that our model is the simplest way to identify elite stocks poised to beat the market on a consistent basis.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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