Have you been paying attention to shares of SonicSONC ? Shares have been on the move with the stock up 27.1% over the past month. SONC hit a new 52-week high of $32.45 in the previous session. Sonic has gained 16.1% since the start of the year compared to the 12.7% move for the Retail-Wholesale sector and the 3.2% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on March 27, 2018, Sonic reported EPS of $0.17 versus the Zacks Consensus Estimate of $0.15 while it missed the consensus revenue estimate by 6.2%.
For the current fiscal year, Sonic is expected to post earnings of $1.47 per share on $438.66 million in revenues. This represents a 17.6% change in EPS on a -8.09% change in revenues. For the next fiscal year, the company is expected to earn $1.63 per share on $445.07 million in revenues. This represents a year-over-year change of 11.41% and 1.46%, respectively.
Sonic may be at a 52-week high right now, but what might the future hold for SONC? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Sonic has a Value Score of B. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 21.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.3X versus its peer group's average of 12.5X. Additionally, the stock has a PEG ratio of 1.48. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Sonic Corp. Price and Consensus
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Sonic currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Sonic passes the test. Thus, it seems as though SONC shares could have potential in the weeks and months to come.
How Does Sonic Stack Up to the Competition?
Shares of Sonic have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Domino's Pizza DPZ , SpartanNash SPTN , and Herbalife LTD. HLF , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Sonic. Still, the fundamentals for SONC are promising, and it still has potential despite being at a 52-week high.