Is Trending Stock Hologic, Inc. (HOLX) a buy it now?
Hological (HOLX) has been one of the most searched stocks on Zacks.com lately. So, you might want to consider some of the facts that could shape the stock’s performance in the short term.
Over the past month, shares of this medical device maker have returned +15.2%, compared to the +7.9% change in the Zacks S&P 500 composite. During this period, the industry Zacks Medical – Instruments, which includes Hologic, gained 13.3%. The key question now is: what could be the future direction of the title?
Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.
Revisions to earnings estimates
At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
Hologic is expected to post earnings of $1.55 per share for the current quarter, representing a year-over-year change of -40.2%. Over the past 30 days, the Zacks consensus estimate has remained unchanged.
The consensus earnings estimate of $5.10 for the current fiscal year indicates a year-over-year change of -39.4%. This estimate has remained unchanged for the past 30 days.
For the next fiscal year, the consensus earnings estimate of $3.78 indicates a -25.9% change from what Hologic was expected to report a year ago. Over the past month, the estimate has remained unchanged.
With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Hologic is ranked Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a business.
In the case of Hologic, the consensus sales estimate of $1.28 billion for the current quarter indicates a year-over-year change of -17.1%. Estimates of $4.39 billion and $3.94 billion for the current and next fiscal year indicate variations of -22% and -10.3%, respectively.
Latest reported results and history of surprises
Hologic reported revenue of $1.47 billion in the last reported quarter, representing a year-over-year change of -8.6%. EPS of $2.17 for the same period versus $2.86 a year ago.
Compared to the Zacks consensus estimate of $1.12 billion, reported revenue is a surprise +31.43%. Surprise EPS was +80.83%.
In the past four quarters, Hologic has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates three times during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on. ), which helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.
Hologic is rated A on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether or not it’s worth paying attention to the market buzz about Hologic. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.