PagSeguro Digital Ltd. (PAGS) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The upward trend in estimate revisions for this company reflects growing optimism of analysts on its earnings prospects, 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
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 PagSeguro Digital, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
Current-Quarter Estimate Revisions
The earnings estimate of $0.29 per share for the current quarter represents a change of -12.12% from the number reported a year ago.
Over the last 30 days, the Zacks Consensus Estimate for PagSeguro Digital has increased 14.71% because two estimates have moved higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $1.23 per share for the full year, which represents a change of +1.65% from the prior-year number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, two estimates have moved up for PagSeguro Digital versus no negative revisions. This has pushed the consensus estimate 6.41% higher.
Favorable Zacks Rank
Thanks to promising estimate revisions, PagSeguro Digital 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 PagSeguro Digital because of its solid estimate revisions, as evident from the stock's 12.2% 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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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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