Shares of CSG Systems International (CSGS) have been strong performers lately, with the stock up 15.5% over the past month. The stock hit a new 52-week high of $58.69 in the previous session. CSG Systems International has gained 82.6% since the start of the year compared to the 29.3% move for the Zacks Computer and Technology sector and the 33% return for the Zacks Computer - 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 October 30, 2019, CSG Systems reported EPS of $0.88 versus consensus estimate of $0.81 while it beat the consensus revenue estimate by 1.79%.
For the current fiscal year, CSG Systems is expected to post earnings of $3.35 per share on $957.23 million in revenues. This represents a 9.48% change in EPS on a 9.39% change in revenues. For the next fiscal year, the company is expected to earn $3.57 per share on $972.55 million in revenues. This represents a year-over-year change of 6.57% and 1.6%, respectively.
CSG Systems 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 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. 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.
CSG Systems has a Value Score of B. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 17.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 12.8X versus its peer group's average of 15X. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, CSG Systems 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 CSG Systems passes the test. Thus, it seems as though CSG Systems shares could have a bit more room to run in the near term.
How Does CSG Systems Stack Up to the Competition?
Shares of CSG Systems 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 impressive, including ManTech International (MANT), CGI Group (GIB), and CACI International (CACI), 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 5% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CSG Systems, even beyond its own solid fundamental situation.
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