LSI Industries Inc. (LYTS) Hits Fresh High: Is There Still Room to Run?

Have you been paying attention to shares of LSI (LYTS)? Shares have been on the move with the stock up 24% over the past month. The stock hit a new 52-week high of $10.11 in the previous session. LSI has gained 47.1% since the start of the year compared to the -25.1% move for the Zacks Construction sector and the -29.9% return for the Zacks Building Products - Lighting 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 November 2, 2022, LSI reported EPS of $0.22 versus consensus estimate of $0.17 while it beat the consensus revenue estimate by 7.79%.

For the current fiscal year, LSI is expected to post earnings of $0.76 per share on $483.66 million in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $0.83 per share on $499.05 million in revenues.

Valuation Metrics

LSI 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 is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb 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.

LSI has a Value Score of A. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 13.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 9.6X versus its peer group's average of 9.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, LSI currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

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 LSI meets the list of requirements. Thus, it seems as though LSI shares could have a bit more room to run 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.