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Anatomy of Success: Conn's Inc. (CONN)

Ryan McQueeney
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The proven Zacks Rank is a great method for identifying stocks that are likely to outperform the market over the next three to months. And the best part? The system finds a wide variety of stocks—including those with different market caps and from a wide range of industries—that should resonate with beginning and experienced investors alike.

When a company earns the coveted Zacks Rank #1 (Strong Buy), investors should rest assured that it is displaying the right characteristics to beat the market. But achieving this top rank is no easy task. Of the thousands of companies tracked by Zacks, only about 5% earn this designation.

In the profile below, you will read about one particular stock that helped prove the capabilities of the Zacks Rank. If investors had followed our ranking system when it highlighted this skyrocketing retailer, they would have witnessed remarkable profits.

Conn’s Inc. (CONN)

Conn’s is a specialty retailer currently operating retail locations in the southern United States. It primarily sells major home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, VCRs, DVD players and home theater products.

Conn’s was a fixture of the Zacks Rank #1 (Strong Buy) list throughout 2017, first earning the mark on June 9—just a few days after the company’s earnings report date. In that earnings announcement, Conn’s posted a narrower-than-expected loss of 5 cents per share, outpacing the Zacks Consensus Estimate which called for a 17-cent loss. This was one of the first indications that Conn’s was on track for a major turnaround year in terms of profitability.

The retailer would maintain its first #1 (Strong Buy) designation for three weeks, never dipping below a #3 (Hold) and spending some time as a #2 (Buy) before once again earnings the top rank on Sep. 15. CONN’s second Zacks Rank #1 (Strong Buy) of 2017 came shortly after the release of its new earnings report, with the company posting surprise profits and blowing away analyst expectations.

In this quarter, Conn’s reported adjusted earnings of 26 cents per share, crushing the Zacks Consensus Estimate of a 2-cent loss. This remarkable outperformance clearly lifted analyst sentiment and inspired positive estimate revisions, as CONN would go on to spend eight-consecutive weeks at on the #1 list in the wake of this report.

Conn’s hardly took any time off from the top-rank list and never suck below a #3 (Hold) ahead of its third #1 (Strong Buy) designation on Dec. 15. Shares of the company had already soared nearly 70% since the time it first joined the #1 list at this point, and the stock would only gather more momentum from there.

This third #1 (Strong Buy) was also inspired by strong earnings results. Just a week earlier, the retailer reported adjusted earnings of 18 cents per share, beating the Zacks Consensus Estimate of 4 cents a share and improving significantly from the 8-cent loss witnessed in the year-ago period. Conn’s also got its revenue picture back on track, posting better-than-expected net sales of $373 million. The company’s consistent ushered in a tidal wave of positive analyst sentiment, and its improving outlook helped it stay on the #1 list for 16 weeks.

The below chart demonstrates the price performance for CONN and 12-month forward looking EPS estimate (in red), starting from the time the stock first earned a Zacks Rank #1 (Strong Buy).

 

As we can see, CONN was a huge winner for those that followed the Zacks Rank. The stock has soared more than 240% over the past year, and although the recent selloff has dragged shares down, it is still up about 70% since it was first assigned a Zacks Rank #1 (Strong Buy). Investors should know that our model is the simplest way to identify elite stocks poised to beat the market on a consistent basis.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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