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General Finance (GFN) Surges 55.7%: Is This an Indication of Further Gains?

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General Finance shares soared 55.7% in the last trading session to close at $18.95. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 3.8% gain over the past four weeks.

This increased investor optimism can be attributed to the news of its merger with United Rentals (URI - Free Report) for $19 per share in cash, representing a total enterprise value of $996 million.

Price and Consensus

Price Consensus Chart for GFN

This owner of mobile storage, liquid containment and modular space businesses is expected to post quarterly earnings of $0.04 per share in its upcoming report, which represents a year-over-year change of -66.7%. Revenues are expected to be $80.4 million, down 10.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For General Finance, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. More importantly, as the stock has already reached the offer price for its acquisition, the possibility of a price appreciation down the road is slim.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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