Back to top

Image: Bigstock

SMART Global Holdings, Inc. (SGH) Soars to 52-Week High, Time to Cash Out?

Read MoreHide Full Article

Shares of SMART Global Holdings (SGH - Free Report) have been strong performers lately, with the stock up 31.7% over the past month. The stock hit a new 52-week high of $59.56 in the previous session. SMART Global Holdings has gained 54.2% since the start of the year compared to the 28.9% move for the Zacks Computer and Technology sector and the 32.6% return for the Zacks Electronics - Semiconductors industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 12, 2021, SMART Global Holdings, Inc. reported EPS of $2.16 versus consensus estimate of $1.6 while it beat the consensus revenue estimate by 1.31%.

For the current fiscal year, SMART Global Holdings, Inc. is expected to post earnings of $6.41 per share on $1.82 billion in revenues. This represents a 22.8% change in EPS on a 21.2% change in revenues.

Valuation Metrics

While SMART Global Holdings, Inc. has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

SMART Global Holdings, Inc. has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 9.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 8.4X versus its peer group's average of 22X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, SMART Global Holdings, Inc. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if SMART Global Holdings, Inc. passes the test. Thus, it seems as though SMART Global Holdings, Inc. shares could still be poised for more gains ahead.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

SMART Global Holdings, Inc. (SGH) - free report >>

Published in