Have you been paying attention to shares of Federal Signal (FSS)? Shares have been on the move with the stock up 14% over the past month. The stock hit a new 52-week high of $28.45 in the previous session. Federal Signal has gained 42.7% since the start of the year compared to the 26.4% move for the Zacks Conglomerates sector and the 26.4% return for the Zacks Diversified Operations 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 February 28, 2019, Federal Signal reported EPS of $0.39 versus consensus estimate of $0.32.
For the current fiscal year, Federal Signal is expected to post earnings of $1.55 per share on $1.15 billion in revenues. This represents an 8.39% change in EPS on a 5.3% change in revenues. For the next fiscal year, the company is expected to earn $1.73 per share on $1.2 billion in revenues. This represents a year-over-year change of 11.4% and 4.7%, respectively.
Federal Signal 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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Federal Signal has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 18.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13.8X versus its peer group's average of 9.6X. 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, Federal Signal currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
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 Federal Signal passes the test. Thus, it seems as though Federal Signal shares could have a bit more room to run in the near term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Federal Signal Corporation (FSS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research