Mercer International Inc. (MERC) Soars to 52-Week High, Time to Cash Out?
Have you been paying attention to shares of Mercer International (MERC)? Shares have been on the move with the stock up 24.1% over the past month. The stock hit a new 52-week high of $17.39 in the previous session. Mercer International has gained 44.2% since the start of the year compared to the -5.2% move for the Zacks Basic Materials sector and the -5.4% return for the Zacks Paper and Related Products industry.
What's Driving the Outperformance?
The stock has a great 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 July 28, 2022, Mercer International reported EPS of $1.07 versus consensus estimate of $1.06.
Valuation Metrics
Mercer International 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.
Mercer International has a Value Score of A. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 4.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 8.9X. On a trailing cash flow basis, the stock currently trades at 3.5X versus its peer group's average of 5.2X. 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, Mercer International currently has a Zacks Rank of #1 (Strong 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 Mercer International fits the bill. Thus, it seems as though Mercer International shares could have potential in the weeks and months to come.
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