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Shares of Aegion (AEGN) have been strong performers lately, with the stock up 12.1% over the past month. The stock hit a new 52-week high of $29.8 in the previous session. Aegion has gained 52.9% since the start of the year compared to the 12.1% move for the Zacks Construction sector and the 10.4% return for the Zacks Building Products - Miscellaneous 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 March 10, 2021, Aegion reported EPS of $0.31 versus consensus estimate of $0.3 while it missed the consensus revenue estimate by 19.77%.
For the current fiscal year, Aegion is expected to post earnings of $1.14 per share on $834.3 million in revenues. This represents an 8.57% change in EPS on a -17.7% change in revenues. For the next fiscal year, the company is expected to earn $1.25 per share on $858.2 million in revenues. This represents a year-over-year change of 9.65% and 2.86%, respectively.
Aegion 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 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.
Aegion has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 25.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 14.1X versus its peer group's average of 15.2X. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Aegion 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 (Buy) and Style Scores of A or B, it looks as if Aegion meets the list of requirements. Thus, it seems as though Aegion shares could have potential in the weeks and months to come.
How Does Aegion Stack Up to the Competition?
Shares of Aegion have been soaring, 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 Owens Corning (OC), Installed Building Products (IBP), and TopBuild (BLD), 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.
The Zacks Industry Rank is in the top 42% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Aegion, even beyond its own solid fundamental situation.
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