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Why RCM Technologies (RCMT) Might be Well Poised for a Surge

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RCM Technologies, Inc. (RCMT - Free Report) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The upward trend in estimate revisions for this 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.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for RCM Technologies, as there has been strong agreement among the covering analysts in raising estimates.

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 $0.56 per share for the current quarter, which represents a year-over-year change of +19.15%.

The Zacks Consensus Estimate for RCM Technologies has increased 7.69% 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 $2.28 per share for the full year, which represents a change of +8.06% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, one estimate has moved up for RCM Technologies versus no negative revisions. This has pushed the consensus estimate 7.55% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, RCM Technologies currently carries a Zacks Rank #1 (Strong 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.

Bottom Line

While strong estimate revisions for RCM Technologies have attracted decent investments and pushed the stock 13.9% 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.


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