Have you been paying attention to shares of Avalara (AVLR)? Shares have been on the move with the stock up 30.8% over the past month. The stock hit a new 52-week high of $103.64 in the previous session. Avalara has gained 31.7% since the start of the year compared to the 1.3% move for the Zacks Computer and Technology sector and the 21.9% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has a great 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 May 7, 2020, Avalara reported EPS of $-0.05 versus consensus estimate of $-0.11 while it beat the consensus revenue estimate by 3.12%.
For the current fiscal year, Avalara is expected to post earnings of $-0.22 per share on $464.15 million in revenues. This represents a -83.33% change in EPS on a 21.37% change in revenues. For the next fiscal year, the company is expected to earn $-0.02 per share on $559.49 million in revenues. This represents a year-over-year change of 93.18% and 20.54%, respectively.
Avalara 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 these give investors a variety of ways to comb 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.
Avalara has a Value Score of F. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Avalara currently has a Zacks Rank of #2 (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 Avalara fits the bill. Thus, it seems as though Avalara shares could have potential in the weeks and months to come.
How Does Avalara Stack Up to the Competition?
Shares of Avalara 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 looking good, including BLACKLINE INC (BL), CrowdStrike Holdings (CRWD), and Workday (WDAY), 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 13% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Avalara, even beyond its own solid fundamental situation.
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