Can Descartes Systems (DSGX) Run Higher on Rising Earnings Estimates?
Descartes Systems (DSGX) 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 rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this logistics provider, 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. This insight is at the core of our stock rating tool -- the Zacks Rank.
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 Descartes Systems, 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.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.15 per share, which is a change of +66.67% from the year-ago reported number.
Over the last 30 days, one estimate has moved higher for Descartes Systems compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 8.75%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $0.58 per share represents a change of +45% from the year-ago number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, three estimates have moved up for Descartes Systems versus no negative revisions. This has pushed the consensus estimate 6.42% higher.
Favorable Zacks Rank
Thanks to promising estimate revisions, Descartes Systems 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.
While strong estimate revisions for Descartes Systems have attracted decent investments and pushed the stock 7.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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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.