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Tale of the Tape

Zacks Equity Research

What Makes RealD (RLD) a Strong Sell?
August 12, 2014

Trades from $3
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 RealD 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 RLD.

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 revision. This trend has caused the consensus estimate to trend lower, going from a gain of 1 cent a share a month ago to its current level of a loss of 19 cents.

Also, for the current quarter, RealD has seen 5 downward estimate revisions versus no revision in the opposite direction, widening the consensus estimate to a loss of 7 cents a share from a loss of 1 cent a share over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 14.1% 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 business services sector, you may instead consider some better-ranked stocks including The ADT Corporation (ADT), Barrett Business Services Inc. (BBSI) and CRA International Inc. (CRAI). All these stocks hold a Zacks Rank #1 (Strong Buy) and may be better selections at this time.

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