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Have you been paying attention to shares of Regional Management (RM)? Shares have been on the move with the stock up 28.8% over the past month. The stock hit a new 52-week high of $60.45 in the previous session. Regional Management has gained 98.6% since the start of the year compared to the 18.3% move for the Zacks Finance sector and the 49.6% return for the Zacks Financial - Consumer Loans 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 August 3, 2021, Regional Management reported EPS of $1.87 versus consensus estimate of $1.48.
For the current fiscal year, Regional Management is expected to post earnings of $6.42 per share on $405.24 million in revenues. This represents a 167.5% change in EPS on an 8.38% change in revenues. For the next fiscal year, the company is expected to earn $5.11 per share on $450.85 million in revenues. This represents a year-over-year change of -20.35% and 11.25%, respectively.
Regional Management 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 has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb 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. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Regional Management has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 9.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.4X versus its peer group's average of 8.2X. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Regional Management currently has a Zacks Rank of #1 (Strong 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 Regional Management meets the list of requirements. Thus, it seems as though Regional Management shares could still be poised for more gains ahead.
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