Shares of Virco Manufacturing Corporation (VIRC) have been strong performers lately, with the stock up 66.4% over the past month. The stock hit a new 52-week high of $10.88 in the previous session. Virco Manufacturing Corporation has gained 132.3% since the start of the year compared to the 18.1% move for the Zacks Consumer Discretionary sector and the 6.1% return for the Zacks Furniture industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on December 8, 2023, Virco Manufacturing Corporation reported EPS of $0.62 versus consensus estimate of $0.39.
For the current fiscal year, Virco Manufacturing Corporation is expected to post earnings of $1.35 per share on $267.3 million in revenues. This represents a 32.35% change in EPS on a 15.68% change in revenues. For the next fiscal year, the company is expected to earn $1.72 per share on $289 million in revenues. This represents a year-over-year change of 27.41% and 8.12%, respectively.
Virco Manufacturing Corporation may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
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.
Virco Manufacturing Corporation has a Value Score of A. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 7.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 15.1X. On a trailing cash flow basis, the stock currently trades at 7.9X versus its peer group's average of 7.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Virco Manufacturing Corporation currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Virco Manufacturing Corporation passes the test. Thus, it seems as though Virco Manufacturing Corporation shares could have potential in the weeks and months to come.
How Does VIRC Stack Up to the Competition?
Shares of VIRC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Hooker Furnishings Corp. (HOFT). HOFT has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Hooker Furnishings Corp. beat our consensus estimate by 150%, and for the current fiscal year, HOFT is expected to post earnings of $2.08 per share on revenue of $459.72 million.
Shares of Hooker Furnishings Corp. have gained 39.7% over the past month, and currently trade at a forward P/E of 17.64X and a P/CF of 12.14X.
The Furniture industry is in the top 32% of all the industries we have in our universe, so it looks like there are some nice tailwinds for VIRC and HOFT, even beyond their own solid fundamental situation.
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