Z scaler (ZS – (Free Report) recently appeared on the list of most searched stocks on Zacks.com. Therefore, you may need to consider some important factors that may influence the stock's performance in the near future.
Shares of this cloud-based information security provider returned -8% over the past month versus a +1.6% change for the Zacks S&P 500 Composite Index. The Zacks Internet-Services industry, which Zscaler belongs to, has risen 11% in this period. The key question here is where the stock is likely to go in the short term.
While media reports and rumors about significant changes in a company's business outlook 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, Zscaler is expected to post earnings of $0.65 per share, which would represent a year-over-year change of +35.4%. The Zacks Consensus Estimate has changed +1.4% over the past 30 days.
The consensus earnings estimate for the current fiscal year of $2.73 represents a +52.5% change from the prior year. This estimate has changed by +2.2% over the past 30 days.
Next year's consensus earnings estimate of $3.22 represents a +18% change from what Zscaler was expected to report a year ago. Over the past month, the forecast has changed by +0.6%.
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 Zscaler a Zacks Rank #2 (Buy).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Revenue growth forecast
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 Zscaler, the consensus revenue estimate for the current quarter is $535.21 Million, representing a year-over-year change of +27.8%. Estimates for the current and next fiscal year are $2.12 billion and $2.64 billion, representing changes of +31.1% and +24.7%, respectively.
Last reported results and surprising details
Zscaler reported revenue of $525 million in its last reported quarter. This represents a +35.5% year-over-year change. EPS for the same period was $0.76, compared to $0.37 a year ago.
The reported earnings represent a surprise of +3.44% when compared to the Zacks Consensus Estimate of $507.56 million. EPS surprise was +31.03%.
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.
The present 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), as well as the company's past value, are Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get a good idea of what
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 ranging from B to F. and B is better than C). ), which can help you identify whether a stock is overvalued, fairly valued, or temporarily undervalued.
Zscaler is rated 'F' 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 Zscaler is worth paying attention to. However, the company's Zacks Rank #2 suggests it has the potential to outperform the broader market in the near term.
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