Bright Horizons (BFAM) Hits a 52-Week High, Can the Run Continue?
Have you been paying attention to shares of Bright Horizons Family Solutions BFAM? Shares have been on the move with the stock up 8.5% over the past month. BFAM hit a new 52-week high of $105.93 in the previous session. Bright Horizons Family Solutions has gained 12.5% since the start of the year compared to the 4.4% move for the Consumer Discretionary sector and the 15% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on April 30, 2018, Bright Horizons Family Solutions reported EPS of $0.72 versus the Zacks Consensus Estimate of $0.71 while it beat the consensus revenue estimate by 1.3%.
For the current fiscal year, Bright Horizons Family Solutions is expected to post earnings of $3.15 per share on $1.91 billion in revenues. This represents a 17.1% change in EPS on a 9.46% change in revenues. For the next fiscal year, the company is expected to earn $3.58 per share on $2.05 billion in revenues. This represents a year-over-year change of 13.65% and 7.77%, respectively.
Valuation Metrics
While BFAM has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? 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.
Bright Horizons Family Solutions has a Value Score of C. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 33.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 25X versus its peer group's average of 20.3X. Additionally, the stock has a PEG ratio of 2.24. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Bright Horizons Family Solutions Inc. Price and Consensus
Bright Horizons Family Solutions Inc. Price and Consensus | Bright Horizons Family Solutions Inc. Quote
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Bright Horizons Family Solutions 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 and Style Scores of A or B, it looks as if Bright Horizons Family Solutions meets the list of requirements. Thus, it seems as though BFAM shares could have potential in the weeks and months to come.
How Does Bright Horizons Family Solutions Stack Up to the Competition?
Shares of Bright Horizons Family Solutions have been rising, 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 Career Education CECO, American Public Education APEI, and Strayer Education STRA, 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.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Bright Horizons Family Solutions. Still, the fundamentals for BFAM are promising, and it still has potential despite being at a 52-week high.
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