Castle Biosciences, Inc. (CSTL) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
Analysts' growing optimism on the earnings prospects of this 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. This insight is at the core of our stock rating tool -- the Zacks Rank.
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.
For Castle Biosciences, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.11 per share, which is a change of +210% from the year-ago reported number.
The Zacks Consensus Estimate for Castle Biosciences has increased 86.79% over the last 30 days, as one estimate has gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $0.45 per share for the full year, which represents a change of +121.03% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Castle Biosciences. Over the past month, two estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 17.93%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Castle Biosciences 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.
Bottom Line
Investors have been betting on Castle Biosciences because of its solid estimate revisions, as evident from the stock's 10.5% 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.
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