Has Harris (HRS) Outpaced Other Computer and Technology Stocks This Year?
Have you been paying attention to shares of Federal Signal FSS? Shares have been on the move with the stock up 2.3% over the past month. FSS hit a new 52-week high of $24.39 in the previous session. Federal Signal has gained 21.3% since the start of the year compared to the -6.4% move for the Conglomerates sector and the -6.4% year-to-date return for its peer group.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 8, 2018, Federal Signal reported EPS of $0.23 versus the Zacks Consensus Estimate of $0.2 while it beat the consensus revenue estimate by 3.52%.
For the current fiscal year, Federal Signal is expected to post earnings of $1.2 per share on $1.05 billion in revenues. This represents a 41.18% change in EPS on a 16.82% change in revenues. For the next fiscal year, the company is expected to earn $1.43 per share on $1.12 billion in revenues. This represents a year-over-year change of 18.89% and 7.02%, respectively.
Federal Signal may be at a 52-week high right now, but what might the future hold for FSS? 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 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 C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 20.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 18X versus its peer group's average of 11X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Federal Signal Corporation Price and Consensus
Federal Signal Corporation Price and Consensus | Federal Signal Corporation Quote
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 rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Federal Signal meets the list of requirements. Thus, it seems as though FSS shares could have a bit more room to run in the near term.
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