Have you been paying attention to shares of Rosetta Stone (RST)? Shares have been on the move with the stock up 41.6% over the past month. The stock hit a new 52-week high of $24.01 in the previous session. Rosetta Stone has gained 40% since the start of the year compared to the 16.1% move for the Zacks Computer and Technology sector and the 15.7% return for the Zacks Computer - Software 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 March 6, 2019, Rosetta Stone reported EPS of $-0.19 versus consensus estimate of $-0.41 while it beat the consensus revenue estimate by 1.31%.
For the current fiscal year, Rosetta Stone is expected to post earnings of $-0.68 per share on $191 million in revenues. This represents a 28.42% change in EPS on a 10% change in revenues. For the next fiscal year, the company is expected to earn $-0.22 per share on $225 million in revenues. This represents a year-over-year change of 66.91% and 17.8%, respectively.
Rosetta Stone 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.
Rosetta Stone has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Rosetta Stone 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 Rosetta Stone fits the bill. Thus, it seems as though Rosetta Stone shares could have a bit more room to run in the near term.
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