Exfo 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 telecommunications testing 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. 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.
For Exfo, 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
The company is expected to earn $0.05 per share for the current quarter, which represents a year-over-year change of +141.67%.
The Zacks Consensus Estimate for Exfo has increased 66.67% over the last 30 days, as one estimate has gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $0.29 per share for the full year, which represents a change of +1066.67% from the prior-year number.
The revisions trend for the current year also appears quite promising for Exfo, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 46.15%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Exfo 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.
While strong estimate revisions for Exfo have attracted decent investments and pushed the stock 17.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.