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Sony (SNE) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research

Shares of Sony (SNE) have been strong performers lately, with the stock up 5.9% over the past month. The stock hit a new 52-week high of $69.06 in the previous session. Sony has gained 1.6% since the start of the year compared to the 1.2% move for the Zacks Consumer Discretionary sector and the 1.5% return for the Zacks Audio Video Production 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 October 30, 2019, Sony reported EPS of $1.39 versus consensus estimate of $1.08 while it missed the consensus revenue estimate by 3.8%.

For the current fiscal year, Sony is expected to post earnings of $4.05 per share on $74.09 billion in revenues. This represents a -37.01% change in EPS on a -5.15% change in revenues. For the next fiscal year, the company is expected to earn $4.65 per share on $77.07 billion in revenues. This represents a year-over-year change of 14.86% and 4.01%, respectively.

Valuation Metrics

Sony 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 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.

Sony has a Value Score of A. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 17.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 7.4X versus its peer group's average of 11.7X. Additionally, the stock has a PEG ratio of 2.21. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Sony 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 Sony fits the bill. Thus, it seems as though Sony shares could have potential in the weeks and months to come.

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