Computer Programs and Systems (CPSI - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
Analysts' growing optimism on the earnings prospects of this healthcare information technology company is driving estimates higher, 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
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 Computer Programs and Systems, 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 $0.58 per share for the current quarter, which represents a year-over-year change of -7.94%.
The Zacks Consensus Estimate for Computer Programs and Systems has increased 33.33% over the last 30 days, as five estimates have gone higher while three have gone lower.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $2.31 per share, representing a year-over-year change of +30.51%.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, 10 estimates have moved up for Computer Programs and Systems versus no negative revisions. This has pushed the consensus estimate 22.07% higher.
Favorable Zacks Rank
Thanks to promising estimate revisions, Computer Programs and Systems currently carries a Zacks Rank #2 (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.
Investors have been betting on Computer Programs and Systems because of its solid estimate revisions, as evident from the stock's 6.3% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.