Magic Software (MGIC - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The upward trend in estimate revisions for this business process integration software company reflects growing optimism of analysts on its earnings prospects, which 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. Our stock rating tool -- the Zacks Rank -- has this insight at its core.
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.
For Magic Software, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.17 per share, which is a change of 0% from the year-ago reported number.
Over the last 30 days, the Zacks Consensus Estimate for Magic Software has increased 10% because two estimates have moved higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $0.70 per share for the full year, which represents a change of +20.69% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Magic Software. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 7.69%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Magic Software currently carries a Zacks Rank #2 (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.
Magic Software shares have added 10% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.