Clearfield, Inc. (CLFD) is Attracting Investor Attention: Here is What You Should Know

Clearfield (CLFD) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Over the past month, shares of this maker of fiber optic management products have returned -19%, compared to the Zacks S&P 500 composite's -6.7% change. During this period, the Zacks Wireless Equipment industry, which Clearfield falls in, has lost 7.8%. The key question now is: What could be the stock's future direction?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Earnings Estimate Revisions

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

Clearfield is expected to post earnings of $0.60 per share for the current quarter, representing a year-over-year change of -9.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

For the current fiscal year, the consensus earnings estimate of $4.39 points to a change of +23.7% from the prior year. Over the last 30 days, this estimate has remained unchanged.

For the next fiscal year, the consensus earnings estimate of $5.58 indicates a change of +27.2% from what Clearfield is expected to report a year ago. Over the past month, the estimate has remained unchanged.

With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #4 (Sell) for Clearfield.

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

12-month consensus EPS estimate for CLFD _12MonthEPSChartUrl

Projected Revenue Growth

Even though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of Clearfield, the consensus sales estimate of $71.15 million for the current quarter points to a year-over-year change of +33%. The $381.7 million and $464.1 million estimates for the current and next fiscal years indicate changes of +40.9% and +21.6%, respectively.

Last Reported Results and Surprise History

Clearfield reported revenues of $85.94 million in the last reported quarter, representing a year-over-year change of +68.2%. EPS of $1 for the same period compares with $0.75 a year ago.

Compared to the Zacks Consensus Estimate of $85 million, the reported revenues represent a surprise of +1.11%. The EPS surprise was +3.09%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Clearfield is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Clearfield. However, its Zacks Rank #4 does suggest that it may underperform the broader market in the near term.

Free Report: Must-See Hydrogen Stocks

Hydrogen fuel cells are already used to provide efficient, ultra-clean energy to buses, ships and even hospitals. This technology is on the verge of a massive breakthrough, one that could make hydrogen a major source of America's power. It could even totally revolutionize the EV industry.

Zacks has released a special report revealing the 4 stocks experts believe will deliver the biggest gains.

Download Cashing In on Cleaner Energy today, absolutely free.

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

Clearfield, Inc. (CLFD) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.