lambus (RMBS – Free Report) has been one of the most-watched stocks by Zacks.com visitors lately. Therefore, we recommend considering several factors that can affect a stock's short-term performance.
Over the past month, the memory chip designer's stock is up +11%. This compares to a +3.6% change in the Zacks S&P 500 Composite Index. During this period, the Zacks Electronics – Semiconductor industry, which includes Rambus, gained 1.9%. The key question here is: What is the future direction of the stock price?
While media reports and rumors about material changes in a company's business prospects typically trigger stock price trends and lead to immediate price movements, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. Exists.
Regarding revisions to performance forecasts
At Zacks, we prioritize evaluating changes in company earnings estimates rather than focusing on anything else. This is because we believe that the fair value of a stock is determined by the present value of its future income stream.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Lambuth is expected to post earnings of $0.44 per share, unchanged from the year-ago period. The Zacks Consensus Estimate remained unchanged over the past 30 days.
The consensus earnings estimate for the current fiscal year of $1.94 represents a year-over-year change of +8.4%. This estimate has not changed over the past 30 days.
Next year's consensus earnings estimate of $2.58 represents a +33% change from the earnings Rambus was expected to report a year ago. Estimates have not changed over the past month.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, leverages the power of earnings estimate revisions to provide a more definitive picture on near-term stock price direction. To do. The magnitude of the recent change in consensus estimates, as well as three other factors related to earnings expectations, give Lambuth a Zacks Rank #4 (Sell).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Expected revenue growth rate
Earnings growth is arguably the best indicator of a company's financial health, but nothing will happen if a company can't grow its revenue. After all, it's nearly impossible for a company to increase profits over a long period of time without increasing revenue. Therefore, it's important to know a company's earnings growth potential.
For Rambus, the consensus revenue estimate for the current quarter is $132 million, representing a year-over-year change of -11.4%. For the current and next fiscal year, estimates of $585 million and $774.4 million represent changes of +4.7% and +32.4%, respectively.
Last reported results and surprising details
Rambus reported revenue of $136 million in its last reported quarter. This represents a -12.4% year-over-year change. EPS for the same period was $0.47, compared to $0.47 for the same period last year.
The reported earnings represent a surprise of +1.49% when compared to the Zacks Consensus Estimate of $134 million. EPS surprise was +4.44%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates every time during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. Whether a stock's current price accurately reflects the intrinsic value of the underlying business and the company's growth prospects is a key determinant of future stock performance.
Compare the current value of a company's valuation multiples, such as price to earnings (P/E), price to sales (P/S), and price to cash flow (P/CF), to the company's value, as well as its historical value. Value helps determine whether a stock is fairly valued, overvalued, or undervalued, and by comparing a company to its peers based on these parameters, you can determine whether a stock is reasonably priced. I can understand the gender.
As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) categorizes stocks into five groups, ranging from A to F, with A being B and B is better than C). ), which can help you identify whether a stock is overvalued, fairly valued, or temporarily undervalued.
Rambus receives an F rating on this score, indicating that it trades at a premium relative to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz surrounding Rambus is worth paying attention to. However, the company's Zacks Rank #4 suggests it may underperform the broader market in the short term.
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