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Falling Earnings Estimates Signal Weakness Ahead for LeapFrog Enterprises (LF)
February 20, 2014

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Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is LeapFrog Enterprises Inc. , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A  Zacks Rank #5 (Strong Sell) further confirms weakness in LF.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 5 estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from $0.57 a share a month ago to its current level of $0.21.

Also, for the current quarter, LeapFrog Enterprises has seen 4 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to a loss of $0.20 a share from a loss of $0.06 over the past 30 days.    

The stock also has seen some pretty dismal trading lately, as the share price has dropped 13.2% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the consumer goods sector, you may instead consider some better-ranked stocks including Glu Mobile, Inc. (GLUU - Free Report) , Take-Two Interactive Software Inc. (TTWO - Free Report) and The Walt Disney Company (DIS - Free Report) . While Glu Mobile hold a Zacks Rank #1 (Strong Buy), Take-Two Interactive Software and Walt Disney carry a Zacks Rank #1 (Strong Buy) and may be better selections at this time.

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