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Digital Turbine (APPS) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research

Have you been paying attention to shares of Digital Turbine (APPS)? Shares have been on the move with the stock up 5.5% over the past month. The stock hit a new 52-week high of $6.02 in the previous session. Digital Turbine has gained 202.2% since the start of the year compared to the 17.1% move for the Zacks Computer and Technology sector and the 28.5% 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 5, 2019, Digital Turbine reported EPS of $0.05 versus consensus estimate of $0.02 while it beat the consensus revenue estimate by 7.62%.

For the current fiscal year, Digital Turbine is expected to post earnings of $0.13 per share on $126.39 million in revenues. This represents a 62.5% change in EPS on a 22.03% change in revenues. For the next fiscal year, the company is expected to earn $0.15 per share on $153.24 million in revenues. This represents a year-over-year change of 17.95% and 21.24%, respectively.

Valuation Metrics

Digital Turbine 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.

Digital Turbine has a Value Score of D. 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 43.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 65.1X versus its peer group's average of 26.3X. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Digital Turbine 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 Digital Turbine fits the bill. Thus, it seems as though Digital Turbine shares could still be poised for more gains ahead.

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