Earnings Estimates Moving Higher for PennyMac (PFSI): Time to Buy?
PennyMac Financial (PFSI) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The upward trend in estimate revisions for this mortgage banking and investment management 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.
For PennyMac, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
Current-Quarter Estimate Revisions
The company is expected to earn $2.24 per share for the current quarter, which represents a year-over-year change of +292.98%.
The Zacks Consensus Estimate for PennyMac has increased 13.25% over the last 30 days, as four estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $10.18 per share for the full year, which represents a change of +94.27% from the prior-year number.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, three estimates have moved up for PennyMac versus no negative revisions. This has pushed the consensus estimate 8.7% higher.
Favorable Zacks Rank
The promising estimate revisions have helped PennyMac earn 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 PennyMac have attracted decent investments and pushed the stock 5.7% 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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PennyMac Financial Services, Inc. (PFSI) : Free Stock Analysis Report
