Shares of CrowdStrike Holdings (CRWD) have been strong performers lately, with the stock up 20.3% over the past month. The stock hit a new 52-week high of $213.14 in the previous session. CrowdStrike Holdings has gained 99.5% since the start of the year compared to the 46.4% move for the Zacks Computer and Technology sector and the 54.8% return for the Zacks Internet - Software 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 August 30, 2023, CrowdStrike reported EPS of $0.74 versus consensus estimate of $0.56.
For the current fiscal year, CrowdStrike is expected to post earnings of $2.82 per share on $3.04 billion in revenues. This represents an 83.12% change in EPS on a 35.58% change in revenues. For the next fiscal year, the company is expected to earn $3.46 per share on $3.89 billion in revenues. This represents a year-over-year change of 22.67% and 27.99%, respectively.
CrowdStrike 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
CrowdStrike has a Value Score of F. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 74.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 36X. On a trailing cash flow basis, the stock currently trades at 465.1X versus its peer group's average of 16.9X. Additionally, the stock has a PEG ratio of 2.08. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, CrowdStrike 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 CrowdStrike fits the bill. Thus, it seems as though CrowdStrike shares could still be poised for more gains ahead.
How Does CRWD Stack Up to the Competition?
Shares of CRWD have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Datadog, Inc. (DDOG). DDOG has a Zacks Rank of # 2 (Buy) and a Value Score of F, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. Datadog, Inc. beat our consensus estimate by 32.35%, and for the current fiscal year, DDOG is expected to post earnings of $1.71 per share on revenue of $2.11 billion.
Shares of Datadog, Inc. have gained 39.2% over the past month, and currently trade at a forward P/E of 73.25X and a P/CF of 1133.69X.
The Internet - Software industry is in the top 13% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CRWD and DDOG, even beyond their own solid fundamental situation.
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