NCI Building Systems Inc. NCS has observed negative earnings estimate revisions for the current quarter, the current year as well as the next. It has also witnessed a price decline in the past six months.
For the current quarter, NCI Building Systems has seen two downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to 32 cents a share from 42 cents over the past 30 days - a drop of 24%.
For fiscal 2017 and 2018, we have seen two estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the Zacks Consensus Estimate for fiscal 2017 to trend lower, going from 94 cents a share a month ago to its current level of 80 cents. Further, the Zacks Consensus Estimate for fiscal 2018 has slumped 11% to $1.05.
In the past year, the stock has also underperformed the industry it belongs to. Its share price has gained 7.2%, compared with the industry's rise of 17.5%.
Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
Let's delve deeper to find out other reasons why it might not be wise to keep NCI Building Systems stock in your portfolio anymore, at least if you don't intend to wait for a long time.
Unfavorable Zacks Rank, Score: NCI Building Systems currently carries a Zacks Rank #5 (Strong Sell) and a VGM Score of F. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners.
Near-term Headwinds: NCI Building Systems' results in the next quarter will be hampered by potential temporary disruptions at customer job sites due to Hurricane Harvey, which may affect ongoing projects or ability in the short term to accept deliveries. Further, lower volumes in the legacy Components segment due to continued weak market activity remains a concern.
The company expects to fully execute its plans to enhance cost efficiency, and optimize combined manufacturing footprint in phases and estimates incurring future additional restructuring charges associated with these plans. These charges will affect profitability in the near term.
Expensive Valuation: NCI Building System' trailing 12-month price earnings (P/E) ratio is 20.9, while the industry's average trailing 12-month P/E ratio is lower at 19.2. This implies that the stock is overvalued.
High Leverage: NCI Building Systems has a total debt-to-capital ratio of 55%, higher than the industry's 42%.
Lower Margins than Industry: NCI Building System's net margin for the trailing 12-months is 3%, way behind the industry's 8%.
Stocks to Consider
For investors keen on the industry, one may instead consider a better-ranked stock, TopBuild Corp. BLD , which currently sports a Zacks Rank #1 (Strong Buy) and has an average positive earnings surprise of 10.42% in the last four quarters. You can see the complete list of today's Zacks #1 Rank stocks here .
Caesarstone Ltd. CSTE carries a Zacks Rank #2 (Buy) is also another good option with an average positive earnings surprise of 2.85% in the last four quarters.
Owens-Corning OC , a Zacks Rank #2 stock has an average positive earnings surprise of 20.2% in the past four quarters.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NCI Building Systems, Inc. (NCS): Free Stock Analysis Report Caesarstone Ltd. (CSTE): Free Stock Analysis Report TopBuild Corp. (BLD): Free Stock Analysis Report Owens Corning Inc (OC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research