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Workday (WDAY) Stock Hits 52-Week High: Can its Growth Continue?

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Workday (WDAY - Free Report) stock jumped 2.3% Thursday, closing at a new 52-week high of $224.30 per share, after climbing as high as $224.43 intraday. The stock has been on a hot streak as of late, up 40.5% YTD.

Workday has had similar stock growth over the past few years, along with some of its industry leaders such as Salesforce.com (CRM - Free Report) . But, over the past few months, the stock has outpaced some industry leaders, posting impressive numbers.

Overview

Workday is a cloud-based financial management software company. The firm was founded in 2005 and went public in October 2012. Workday’s revenues derive from subscriptions to its software services. Products, such as its Human Capital Management service and Financial Management service, allow companies to simplify business operations and increase efficiency. Workday hit the $1 billion revenue mark in 2016 and is expected to make over $3 billion in its current fiscal year.

Outlook

Workday is expected to post significant earnings growth over the next two fiscal years. Our Zacks Consensus Estimates call for 23.53% earnings growth for fiscal 2020 (Workday starts its fiscal year in February). Revenues are also expected to grow 26.29%, from $2.82 billion last year to $3.56 billion. Looking further ahead, analysts forecast another 31.99% earnings growth as well as 23.16% top-line growth in fiscal 2021. These numbers bring fiscal 2021’s EPS estimates to $2.22 per share, which represents a total increase of 63.2% over two years.

Workday’s earnings estimates have also been trending in the right direction recently. Over the past 60 days, the company has earned 22 upward revisions, compared to just four downward changes. Similarly, WDAY has received 18 upward revisions fiscal 2021, compared to just 8 downward revisions. Additionally, over half of the brokers covering Workday, 15 out of 29, currently rank it as a ‘strong buy.’ WDAY’s strong, longer-term upward earnings estimate revision activity also helps it earn a Zacks Rank #2 (Buy) at the moment.

Bottom Line

Even after the recent gains, analysts still remain bullish on the stock and see further potential price increases. Workday has reported positive earnings surprises in 14 out of the past 15 quarters, with an average surprise of 39.73% in the trailing 4 quarters. If Workday is able to continue to grow its top and bottom lines at its current pace, WDAY stock could have even more room to climb.

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