If you still have shares of Broadridge Financial Solutions Inc.BR in your portfolio, it is time you dump them as chances of favorable returns in the near term are bleak.
This is because the stock registered a negative return of 2.3% in the last three months, underperforming the Zacks categorized Outsourcing industry, which gained 7.4%. Let's delve deeper and find out what is taking this Zacks Rank #4 (Sell) company down.
Here's Why Broadridge Should be Avoided
Analysts have become increasingly bearish on the stock over the past couple of months with estimates moving south. With no upward revision in the last 60 days, the Zacks Consensus Estimate for current-quarter earnings declined from $64 cents to $59 cents per share. Similarly, for fiscal 2017, the Zacks Consensus Estimate declined from $3.11 per share to $3.10 per share, over the same time frame.
Adding to the woes, the stock carries a VGM Score of "C." Notably, the Zacks VGM Style Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth, and most promising momentum, across the board. Stocks with a VGM Style Score of 'A' or 'B' and a Zacks Rank of #1 (Strong Buy) or 2 (Buy), have even better returns, on average, than the individual components, as it considers three times as many items that are correlated to future stocks returns.
Notably, Broadridge's second-quarter fiscal 2017 revenues of $892.6 missed the Zacks Consensus Estimate of $939 million. Going forward, Broadridge lowered its 2017 revenue outlook. It now projects revenue growth in the range of 40- 42% (previously 43% to 45%).
Also, Broadridge currently has a trailing 12 month P/E ratio of 24.37. This level compares unfavorably to some extent with what the industry saw over the last year. The ratio is higher than the average level of 23.88 and is towards its higher end of the valuation range over this period. Hence, valuation looks slightly stretched from a P/E perspective.
Competition from DST Systems Inc. DST and pricing pressure remain headwinds.
We expect the aforementioned factors to hurt the company's near-term profitability. Hence, we recommend investors to stay away from Broadridge shares until the Zacks Rank, VGM score and estimates improve.
Stocks to Consider
A couple of better-ranked stocks in the technology sector are Seagate Technology plc STX and Western Digital WDC , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Seagate and Western Digital have a long-term expected earnings growth rate of 8.17% and 12.11%, respectively.
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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.