Have you been paying attention to shares of
Zuora (? Shares have been on the move with the stock up 51.3% over the past month. The stock hit a new 52-week high of $11.57 in the previous session. Zuora has gained 79.6% since the start of the year compared to the 33.3% move for the Zacks Computer and Technology sector and the 40.9% return for the Zacks Internet - Software industry. ZUO Quick Quote ZUO - Free Report) 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 May 24, 2023, Zuora reported EPS of $0.05 versus consensus estimate of $0.
For the current fiscal year, Zuora is expected to post earnings of $0.15 per share on $434.8 million in revenues. This represents a 215.38% change in EPS on a 9.77% change in revenues. For the next fiscal year, the company is expected to earn $0.20 per share on $495.1 million in revenues. This represents a year-over-year change of 33.33% and 13.87%, respectively.
Zuora may be at a 52-week high right now, but what might the future hold for the stock? 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Zuora has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 76.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 42.4X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 17.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Zuora currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 Zuora meets the list of requirements. Thus, it seems as though Zuora shares could still be poised for more gains ahead.
How Does ZUO Stack Up to the Competition?
Shares of ZUO have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is
8x8 Inc (. EGHT has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A. EGHT Quick Quote EGHT - Free Report)
Earnings were strong last quarter. 8x8 Inc beat our consensus estimate by 37.50%, and for the current fiscal year, EGHT is expected to post earnings of $0.54 per share on revenue of $759.89 million.
Shares of 8x8 Inc have gained 52.2% over the past month, and currently trade at a forward P/E of 7.78X and a P/CF of 11.14X.
The Internet - Software industry is in the top 47% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ZUO and EGHT, even beyond their own solid fundamental situation.