Earnings Estimates Moving Higher for McGrath (MGRC): Time to Buy?
McGrath (MGRC) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The upward trend in estimate revisions for this business-to-business rental company reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for McGrath, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $0.81 per share for the current quarter, which represents a year-over-year change of +30.65%.
The Zacks Consensus Estimate for McGrath has increased 9.46% over the last 30 days, as one estimate has gone higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $3.06 per share, representing a year-over-year change of +42.99%.
The revisions trend for the current year also appears quite promising for McGrath, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 8.06%.
Favorable Zacks Rank
Thanks to promising estimate revisions, McGrath currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for McGrath have attracted decent investments and pushed the stock 7.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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