II-VI (IIVI - Free Report) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this Laser and optics manufacturer, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for II-VI, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $0.76 per share for the current quarter represents a change of +13.43% from the number reported a year ago.
Over the last 30 days, six estimates have moved higher for II-VI compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 44.44%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $2.18 per share represents a change of -14.17% from the year-ago number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, six estimates have moved up for II-VI versus no negative revisions. This has pushed the consensus estimate 18.47% higher.
Favorable Zacks Rank
The promising estimate revisions have helped II-VI earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Investors have been betting on II-VI because of its solid estimate revisions, as evident from the stock's 13.2% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.