Have you been paying attention to shares of NIC (EGOV)? Shares have been on the move with the stock up 16.3% over the past month. The stock hit a new 52-week high of $24.38 in the previous session. NIC has gained 88.5% since the start of the year compared to the 24.9% move for the Zacks Computer and Technology sector and the 14.2% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has an impressive 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 30, 2019, NIC reported EPS of $0.21 versus consensus estimate of $0.19 while it beat the consensus revenue estimate by 1.33%.
For the current fiscal year, NIC is expected to post earnings of $0.73 per share on $350.35 million in revenues. This represents a -17.05% change in EPS on a 1.58% change in revenues. For the next fiscal year, the company is expected to earn $0.85 per share on $374.36 million in revenues. This represents a year-over-year change of 17.58% and 6.85%, respectively.
NIC 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 has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort 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.
NIC has a Value Score of C. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 32.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 23X versus its peer group's average of 28.3X. Additionally, the stock has a PEG ratio of 1.8. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, NIC 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 NIC meets the list of requirements. Thus, it seems as though NIC shares could still be poised for more gains ahead.
How Does NIC Stack Up to the Competition?
Shares of NIC have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including MeetMe (MEET), Digital Turbine (APPS), and j2 Global , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 26% of all the industries we have in our universe, so it looks like there are some nice tailwinds for NIC, even beyond its own solid fundamental situation.