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ChannelAdvisor (ECOM) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research
·4 min read

Have you been paying attention to shares of ChannelAdvisor (ECOM)? Shares have been on the move with the stock up 4.6% over the past month. The stock hit a new 52-week high of $14.74 in the previous session. ChannelAdvisor has gained 55.9% since the start of the year compared to the 11.2% move for the Zacks Computer and Technology sector and the 23.5% return for the Zacks Internet - Software and Services 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, ChannelAdvisor reported EPS of $0.17 versus consensus estimate of $0.08 while it beat the consensus revenue estimate by 1.66%.

For the current fiscal year, ChannelAdvisor is expected to post earnings of $0.69 per share on $133.04 million in revenues. This represents a 72.5% change in EPS on a 2.37% change in revenues. For the next fiscal year, the company is expected to earn $0.69 per share on $139.05 million in revenues. This represents a year-over-year change of 0% and 4.52%, respectively.

Valuation Metrics

ChannelAdvisor 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 has run ahead of itself.

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.

ChannelAdvisor has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 20.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 36.7X versus its peer group's average of 16X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

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, ChannelAdvisor currently has a Zacks Rank of #1 (Strong 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 ChannelAdvisor passes the test. Thus, it seems as though ChannelAdvisor shares could still be poised for more gains ahead.

How Does ChannelAdvisor Stack Up to the Competition?

Shares of ChannelAdvisor have been moving higher, 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 solid potential picks, including Donnelley Financial Solutions (DFIN), SYNNEX (SNX), and ServiceNow (NOW), 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 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ChannelAdvisor, even beyond its own solid fundamental situation.

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ChannelAdvisor Corporation (ECOM) : Free Stock Analysis Report
ServiceNow, Inc. (NOW) : Free Stock Analysis Report
SYNNEX Corporation (SNX) : Free Stock Analysis Report
Donnelley Financial Solutions Inc. (DFIN) : Free Stock Analysis Report
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Zacks Investment Research