Vertex (VERX) 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. Our stock rating tool -- the Zacks Rank -- has this insight at its core.
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 Vertex, 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 company is expected to earn $0.14 per share for the current quarter, which represents a year-over-year change of +7.69%.
Over the last 30 days, four estimates have moved higher for Vertex compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 6.98%.
Current-Year Estimate Revisions
The company is expected to earn $0.62 per share for the full year, which represents a change of +58.97% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Vertex. Over the past month, five estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 11.11%.
Favorable Zacks Rank
The promising estimate revisions have helped Vertex earn 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
Vertex shares have added 20.6% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.
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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.
