Monthly Archives: March 2015

Lands’ End: Zacks’ Bear of the Day Play

Trends come and trends go. Remember those sweet “Members Only” jackets. That’s right, I’m talking to you. How about a more recent, very forgettable trend? Trucker hats anyone? If I see Von Dutch again I may just vomit. Unfortunately it’s very hard to stay relevant as a retailer. Sometimes a bigger fish comes in and eats your lunch. Other times, the market just turns away. Even soccer moms switch their style up. Which is probably what’s slapping down this retailer and today’s Bear of the Day, Lands’ End (LE).

Founded in the great city of Chicago originally as a sailboat equipment partner, Lands’ End branched off into a clothing retailer that specializes in casual clothing, luggage and home furnishings. The majority of their business is conducted through mail order and online sales. Once a part of Sears Holdings , Lands’ End was spun off in April 2014.

The recent news surrounding Lands’ End was the resignation of Edgar Huber from the Board and from his roles as President and CEO of the company. Mr. Huber’s resignation from the Board was effective as of February 1, 2015. As part of the severance, Mr. Huber is getting his $850,000 per year base salary for 24 months, a lump sum payment equal to accrued vacation pay, continued health insurance coverage for 24 months and accelerated vesting and payment of $247,976.67 under the company’s Annual Incentive Plan. In the age of “golden parachutes” it’s a very mild and palettable package.

Former President of Dolce & Gabbana Ms. Federica Marchionni took over the reins and is looking to right the ship after a third quarter that saw lower sales but better margins which helped surprise earnings to the upside. Q3 came in at 56 cents versus estimates for 40 cents.

Analysts, however, remain bearish despite a change at the helm. Analysts slashed estimates for the current quarter, next quarter, the current year and next year as well. These downside estimate revisions have dropped the Zacks Consensus Estimates from $2.65 for the current year all the way down to $2.38. What’s more troubling though is the change to next year’s estimate. Analysts are looking for $2.15 per share versus previous consensus of $2.75. That 60 cent drop isn’t as worrisome as the fact that analysts are looking for next year’s numbers to shrink 23 cents per share compared to this year’s numbers. That’s the opposite of the story that you’d like to hear.

The stock price was doing very well shortly after the spin-off. LE more than doubled from the mid-$25 range shortly after going public to nearly $56 by late December 2014. But news of Huber’s resignation helped send shares tumbling, dropping all the way down to $33.16. Shares have traded sideways since the dramatic drop and now are hovering just above $35.

But the technical picture shows a stock that is following through on a stochastic sell signal from overbought territory. The commodity channel index is becoming increasingly bearish as well, dipping from over 100 through the zero line and now sits down at -169.63. Yesterday, with the market in the green across the board LE was off 3%.

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FormFactor: Zacks’ Bull of the Day Play

The future is here. All that high-tech microchip controlled equipment of the future is now. Mobile, NFCs, autonomous vehicles, you name it, it’s here. You don’t want to get left in the dust. Stop losing money chasing the winners of yesterday and get with the times. If you want to be ahead of the game and ahead of the market you need to look at where technology is going, not where it’s been. Today I’m going to give you a little insight into the wave of the future with the Bull of the Day, FormFactor (FORMAnalyst Report).

FormFactor was founded in 1993 and had its IPO on the NASDAQ in 2003. They are the largest probe card supplier in the semiconductor industry. They are headquartered in California and have a global presence to support customers with 970 employees worldwide. They are structured for profitability with high earnings leverage in incremental revenue. Their strong and strengthening balance sheet funds accelerated EPS growth.

FORM owns a strategic position in the semiconductor manufacturing process, positioned between the front end and back end user. Their MEMS technology gives them a key competitive advantage in SoC, DRAM and FLASH memory markets.

During 2014, FormFactor sustained profitability and cash generation, demonstrated their high leverage model and gained market share. They become qualified at all three major DRAM manufacturers. They also qualified their new Vector architecture at two major NAND Flash suppliers.

It’s this improved market position at reduced cost structure that has returned FormFactor to profitability. The advanced probe card market offers an attractive growth opportunity that the company estimates as a $65 to $75 million incremental revenue opportunity through 2016.

The bullish attitude has analysts raising their earnings estimates for the current quarter and current year. The Zacks Consensus Estimate has risen from a two cent loss to a two cent gain for the current quarter and has jacked up current year numbers up from 16 cents per share to 22 cents. That bullish behavior coupled with two recent earnings surprises to the upside has this stock checking in at a Zacks Rank #1 (Strong Buy).

A quick look at the chart shows us the bullish bias has been here since November 2013. Since then the stock has moved from $5 to the $9.36 level it closed at Monday March 16. But if you’re thinking that the best is over you may be wrong. After reaching a fresh 52 week high at $10.29 to start March, the price retreated down to retest the $9 level.

Now you’ve got a stock that pulled back to the 20 day EMA and stochastics that are oversold. It’s from this oversold condition that the indicator is now giving a bullish crossover telling me that it’s time to buy again. Traders can cautiously place stops below $9 with a target on the north side of the 52 week high, giving a very favorable risk versus reward proposition.

American Public Education: Zacks’ Bear of the Day Play

It is appears as though the golden age in for-profit education companies is nearing an end. Students are starting to question the value of degrees from many institutions in this space, while the government seems poised to move more student loan debt into a position that can be wiped out in bankruptcy.

If these trends weren’t enough, many ‘traditional’ schools have moved into the online university realm, dulling the appeal of some for-profit education centers in the process. So clearly, competition and a changing environment are really having a negative impact on a number of companies on this space, making them very precarious investments right now.

One company that exemplifies this negative trend is undoubtedly American Public Education (APEIAnalyst Report). This for-profit education company focuses on two segments—American Public Education and Hondros College of Nursing—and it has been under pressure in this difficult environment.

The company has seen wild swings lately, and shares are easily underperforming the S&P 500 both YTD and over the past year.  But unfortunately for APEI, this doesn’t look likely to be the end of the trend by a long shot. This is especially true if investors look to recent earnings estimate revisions which suggest that more pain is on the way.

Recent Earnings Estimates

Analysts appear to be universally bearish on APEI’s recent prospects, as it is nearly impossible to find someone who has raised their outlook for the company’s earnings in the past two months. Instead, we have witnessed six revisions lower in the past thirty days for the full year period, and four lower in the past 30 days for the current quarter.

But it is the magnitude of these revisions which is the real story, as analysts now expect APEI to earn just 49 cents a share in earnings this quarter, a far cry from the 62 cents a share that was projected just a month ago. It is now expected that APEI will have a year over year earnings contraction of over 16%, further showcasing the bearish short term trend.

And though the short term appears weak, there should also be concern over the long haul too. Analysts are now looking for an earnings contraction of 7.3% for the full year, while earnings estimates for the next year time frame have collapsed from $3.12/share 30 days ago to just $2.31/share today.

Clearly, analysts are getting extremely bearish about the prospects of APEI in both the near and long term. And though the company has shown a strong record when it comes to beating estimates, the recent activity in the stock and the bearish predictions by analysts are hard to ignore. For these reasons, it shouldn’t be surprising to note that APEI has earned itself a Zacks Rank #5 (Strong Sell) and that we are looking for more underperformance from the company in the months ahead.

Other Picks

While the schools industry is pretty weak right now, there are actually a few standouts in the space still. In particular, Universal Technical Institute (UTIAnalyst Report) stands out as a promising choice.

Not only is the stock expected to see double digit EPS growth this year and the next, but it has a Zacks Rank #1 (Strong Buy) as well. So if you are looking for some more schooling in your holdings, make sure your portfolio attends UTI instead of APEI, as the current earnings estimate picture definitely favors Universal Technical Institute right now.

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Monster Beverage: Zacks’ Bull of the Day Play

Over the last few years, we have seen tons of upstart, smaller companies break in and challenge the behemoths of the space. Be it Under Armour against Nike or Chipotle becoming the fast food standard in the arena in which McDonald’s has long reigned, smaller (relatively speaking) companies are taking a bite out of the leaders in the space.

Another great example of this trend is with Monster Beverage (MNSTAnalyst Report). The once unknown firm has risen to prominence and is now a $23 billion company. And while the company is best known for its namesake of Monster Energy drinks, MNST has branched out into sodas, juices, and teas too, becoming a formidable player in the sector.

Though MNST has already seen great growth, the company actually has solid prospects to continue this run well into the future. This is especially true when investors look to recent earnings estimate revisions as analysts seem to still be bullish on the company’s prospects.

Earnings Estimates

Over the past thirty days, it is hard to find an analyst that has not become more bullish on MNST. For the current year, the current quarter, and next year time frames, not a single analyst in our consensus has lowered their estimate, while eight have raised their estimates for the current year time frame alone.
These moves have led to a modest increase in the consensus too, showing just how much analysts believe in the near term prospects of MNST. And with the latest revisions to earnings estimates, MNST is expected to post EPS growth of 20% both this year and the next.

And while these lofty expectations might be a little concerning to some, it is worth noting that MNST is riding a nice winning streak when it comes to earnings season, including its most recent report where it beat estimates by 22%. While a series of misses are before this nice run, it may just be that MNST has finally figured out to match estimates and clearly this is paying off for Monster stock.

Thanks to these factors, it shouldn’t be too surprising to note that MNST has earned itself a Zacks Rank #1 (Strong Buy). This means that we are expecting strong levels of outperformance to continue from this company in the near term and that we are looking for the solid growth levels for MNST to remain the story for this beverage stock.

Bottom Line

If you are seeking a company to shake up the stodgy beverage market, look no further than Monster Beverage. The company has burst onto the scene and has really made a name for itself with its novel lineup of products.

Customers seem to be embracing this approach too, as we have seen an impressive trend for MNST recently, including operating income that has doubled over the past five years. And with current analyst estimate revision trends moving in the right direction, it is hard to argue that MNST is an excellent stock that is worthy of closer inspection right now.

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Rio Tinto: Zacks’ Bear of the Day Play

Falling commodity prices and weak global economic trends have created a very challenging environment for commodity producers. Many metals and mining stocks have been punished by investors in recent months in view of the weak outlook.

About the Company

Rio Tinto (RIOAnalyst Report) is a global industrial metal & mineral mining conglomerate headquartered in London. They employ more than 60,000 people in more than 40 countries across six continents. They have strong presence in Australia and North America, and also have significant businesses in Asia, Europe, Africa and South America. They have five product groups – Aluminum, Copper, Diamonds & Minerals, and Energy and Iron Ore.

Disappointing Financial Results

On February 12, the company reported the financial results for 2014. Consolidated sales for the year were down to $47.7 billion from $51.2 billion a year ago. Weak pricing conditions in the market were mainly responsible for the decline in sales.

Underlying earnings came in at $9.3 billion or $5.03 per share down from $10.2 billion or $5.53 per share recorded a year-ago.  Increased volumes and reduced costs partially offset the impact of lower commodity prices.

The company announced a 12% increase in full year dividend and $2.0 billion share buy-back with the results.

Commodity Price Slump Continues  

While oil price plunge story continues to grab headlines, most other commodities have also gone through a lot of pain in the last few months and the price weakness is expected to continue through much of this year as well.

China is the largest consumer of commodities in the world and thus, slowing economic growth and cooling property market in the country does not bode well for commodities.

Downward Revisions

After poor results, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year $3.12 per share and $3.20 per share, respectively, down from $3.41 per share and $4.83 per share 30 days ago.

The Bottom Line

While the company has taken a number of steps recently to cut costs and improve efficiency, rising supplies and weak demand for commodities will continue to weigh on the results in the near-term.  Mining-Miscellaneous industry is currently ranked 158 out of 265 Zacks industries. It is safer to avoid investing in this space till the outlook improves.

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American Woodmark: Zacks’ Bull of the Day Play

American Woodmark reported excellent quarterly results thanks to strong growth in home remodeling market. As a result, earnings estimates have surged, sending this cabinet maker to Zacks rank #1 (Strong Buy).

About the Company

American Woodmark Corporation (AMWDSnapshot Report) is a leading manufacturer and distributor of kitchen and bath cabinets for remodeling and new home construction markets.

The company manufactures cabinets under five major brands:  American Woodmark, Timberlake Cabinetry, Shenandoah Cabinetry, Shenandoah Value Series and Waypoint Living Spaces and sells more than 613 cabinet lines in a wide variety of design materials and finishes.

Its products are sold through a network of independent dealers and distributors, and directly to major builders and Lowe’s and The Home Depot. The company operates nine manufacturing facilities and seven service centers across the country.

Remodeling Activity Picking Up

According to a report by the Harvard University Joint Center for Housing Studies, spending in the U.S. remodeling market will grow by 4% to 5% this year to at least $330 billion, making 2015 the best year for remodeling spending of the past 15 years, ahead the previous high of $324 billion spending in 2007. It says that with the easing of home price appreciation, homeowners are less likely to invest in costly renovations but they will continue to spend on discretionary renovations including kitchen and bathroom upgrades.

Home Improvement/Furniture Industry Keeps Shining

The Furniture Industry is currently #22 out of 265 (top 8%) on the Zacks Industry Rank list, as a result of positive earnings revisions trend.

As the economy picks up momentum and the job market heals further, discretionary spending on home improvement products will continue to rise.

Excellent Quarterly Results

The company reported its third fiscal quarter results on February 26, 2015. Net sales rose by 12% compared with the same quarter of prior fiscal year to $189.0 million. Net income came in at $7.3 million, or $0.45 per share, compared with income of $2.9 million or $0.04 per share for the prior-year quarter.

Adjusted net income of $0.44 per share was substantially ahead of the Zacks Consensus Estimate of $0.35 per share. The company has beaten Zacks Consensus Estimate in three out of last four quarters, with an average quarterly surprise of 8%.

The company’s gross profit margin for quarter was 18.6% of net sales, up from 15.4% in the same quarter of the prior year. Results benefited from higher sales volume and improved operating efficiency.

Estimates Revisions

As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $2.01 per share and $2.42 per share, up from $1.84 per share and $2.12 per share, 30 days ago.

Rising estimates sent AMWD back to a Zacks Rank#1 (Strong Buy) last month.

The Bottom Line

The home remodeling market continues on its growth trajectory. AMWD is a Zacks Rank#1 (Strong Buy) stock. And with the top industry rank, it has a strong likelihood of outperformance in the short- to medium- term.

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VimpelCom: Zacks’ Bear of the Day Play

VimpelCom Ltd. (VIPSnapshot Report) is one of the world’s largest integrated telecommunications services operators. It offers a wide range of wireless, fixed, and broadband services in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, and various countries in Asia and Africa. They even do business in Italy and Canada.

VimpelCom provides services under the Beeline, Kyivstar, djuice, Wind, Infostrada Mobilink, Leo, Banglalink, Telecel, and Djezzy brands. VimpelCom Ltd. is headquartered in Amsterdam, the Netherlands.

But the stock has consistently been a Zacks #4 Rank Sell for the past year as analysts struggle to get a handle on the company’s earnings outlook. In the past 90 days, EPS estimates for this year have slid from $0.71 to $0.54, a 24% decline.

And next year’s profit projections also took a big hit in the past 90 days, dropping from $1.01 to $0.66, or 35%. It’s no wonder that shares have plummeted over 40% since September.

The stock seems inexpensive trading at under 10X forward estimates, with 1900% EPS growth expected this year. But it’s probably best to stay on the sidelines until the analysts start moving estimates up, instead of down. The Zacks Rank will let you know when the coast is clear.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money Trader.

Mobileye: Zacks’ Bull of the Day Play

Mobileye (MBLYSnapshot Report), the $8 billion global leader in camera-based Advanced Driver Assistance Systems (ADAS), has produced enough good news in March to convince some investors and analysts that the stock price fall from $60 may have reversed before it has a chance to join the “below the IPO” club like Alibaba (BABAAnalyst Report).

With an enormous share lock-up expiring next week for BABA, it’s no wonder the stock is flirting with new lifetime lows. And MBLY almost suffered a similar fate recently as it was expected the company would conduct a secondary offering, as they filed for in January.

But several events conspired to help the company keep those additional shares “on the shelf.” First, a strong fourth quarter report on February 26 helped clarify the company’s strategy and management execution. Q4 revenue of $39.7 million and non-GAAP net income of $13.3 million both beat consensus expectations. The company also generated $15.4 million in free cash flow.

For the full-year 2014, total revenue of $143.6 million was an increase of 77% year-over-year and non-GAAP net income of $46.8 million equaled growth of 41.5% year-over-year. And full-year 2015 guidance was solid with revenues expected to be $217-218 million vs. the $215 million consensus.

New Markets and Partners

The buzz among Wall Street analysts after this report and the subsequent conference call was very enthusiastic. It’s not that profits are going to be pouring through to bring down the lofty valuation. Instead, analysts are looking at Mobileye’s execution of deals and partnerships with major automobile OEMs and top car brands.

Mobileye technology is available in over 150 car models from 18 car manufacturers, including GM, Ford, Honda, and BMW. Further, Mobileye’s technology has been selected for implementation in serial production of 237 car models from 20 OEMs by 2016. And the company is already making inroads into China with new business there expected to contribute to revenues this year.

Following the report, analysts began raising EPS projections and the stock became a Zacks #2 Rank on March 4 as estimates were bumped 25% and 15% for this year and next, respectively.

EyeQ: The Total Integrated Solution

Mobileye develops software and semiconductor technology algorithms they call the EyeQ system-on-a-chip. These systems perform detailed interpretations of the visual field to anticipate possible collisions with other vehicles, pedestrians, and other objects.

Also on March 4, the company introduced its 4th generation system-on-chip, the EyeQ4. And they revealed that they have already won a production contract with a global premium European car manufacturer for the technology to launch in 2018.

Relative to the company’s EyeQ3 chip, the EyeQ4 is faster and can support trifocal camera configurations for use in semi-autonomous driving and other high-end functions in a more compact package. The company also announced that it will launch a scaled-down version of the EyeQ4 chip which will be less expensive that the high capability version.

The 2018 launch seems far away but it’s consistent with what some top analysts were expecting. And the scalability of the technology is welcome too as it will provide automobile OEMs flexibility to add features at the best possible cost.

Better Than a Secondary

While investors fretted last month about the coming secondary, MBLY shares declined over 15% to under $33 by early March. But one large and early investor increased their stake by over 80%. Goldman Sachs was a lead underwriter for the IPO last August and they bought 13.3 million more shares in February, as revealed by an SEC 13G filing on the 17th.

The buys brought their stake to 29.6 million shares, or 13.9% of the company. This show of faith by Goldman was enough to restore faith for some investors because their buys occurred on average between $36 and $37.

Analysts in Motion

But analysts don’t respond to institutional buying. They look at management, balance sheets, and growth prospects. And the overwhelming response to the Mobileye growth story this month was very positive. According to AnalystRatings.net and other sources, here were some of the ratings and/or price target moves by major research houses…

3/5/2015 RBC Capital: Buy $55

3/5/2015 Barclays: Buy $66

3/2/2015 Wells Fargo: Buy $52

2/27/2015 Raymond James: Outperform $49

On February 5, RBC Capital Markets analysts said MBLY might enjoy “at least 78% compound annual growth rates in camera technology for auto-braking systems over the next 5 years.” The investment bank notes the Israeli company has a unique, single-camera technology that’s less expensive and more effective than competing technologies and already has a big partner in Delphi.

After earnings in late February, RBC analyst Joe Spak said he thinks there is more potential upside for Mobileye in 2015 as auto customers jump on its lower-cost sensor solutions that are used in autonomous and semi-autonomous driving options. Spak says the firm is expected to generate revenue growth of 53% this year, but he’s expecting a better outcome.

Also last week, analysts at CitiGroup put out a research note maintaining their Buy rating and $64 price target with the view that Mobileye’s “hyper growth” will continue beyond 2017. The ramp of tri-focal camera technology in 2018 and beyond should support growth of at least 50% annually “at the center of the most-powerful automotive megatrend in history,” said the analysts.

What About the Competition?

Another theme that ran through much analyst commentary last week was that Mobileye was leaving the competition behind with their integrated solutions and key customer/partner relationships. This week was no exception.

On March 11, Mobileye announced a new partnership with, Valeo, a key ADAS technology company. The two companies joined forces to combine Mobileye’s EyeQ family of microprocessors and computer vision algorithms with Valeo’s strong driving assistance sensor portfolio.

Under the cooperation agreement, Valeo will design and industrialize a range of front-facing camera solutions and sensor fusion products using Mobileye’s EyeQ technologies. According to StreetInsider.com, Wells Fargo analyst Richard M. Kwas believes “it may take a few years for the product to become commercially available. The deal is relevant because it’s a new relationship for Mobileye, and Valeo is a global leader in several areas, including driving assistance.”

Kwas also noted that competitor announcements have not mentioned OEM/Tier 1 relationships, suggesting Mobileye’s momentum continues to build.

And that should explain why the stock is finding its footing this month above its IPO price of $36.

Disclosure: I own MBLY shares for the Zacks FTM Trader.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money Trader.

SanDisk: Zacks’ Bear of the Day Play

SanDisk (SNDKAnalyst Report) has a solid history of beating the Zacks Consensus Estimate, so why is this stock now a Zacks Rank #5 (Strong Sell) and the Bear of the Day? Let’s take a look.

Company Description

SanDisk Corp makes data storage solutions in the United States and internationally. The company offers removable cards, which are used in various applications and consumer devices, including digital cameras, camcorders, smartphones and tablets. SanDisk Corp was founded in 1988 and is headquartered in Milpitas, California.

Solid History

The Bear of the Day is a look at why a stock has moved to a Zacks Rank #5 (Strong Sell) and that can happen for a number of reasons. SNDK has a solid history of beating the number, but the most recent report on 1/21 was an earnings meet. That is the first time that SNDK has not topped the Zacks Consensus Estimate since the June 2012 quarter was reported (a miss of two cents).

But a meet isn’t that bad, right? Well they are not bad as long as you don’t see lower guidance and that is just what happened with SNDK.

Earnings Estimates

Estimate revisions drive the Zacks Rank, and the estimate revisions for SDNK have been pretty negative over the last couple of months. The 2015 Zacks Consensus Estimate was $6.04 in August of last year but slipped to $5.94 in November. By December, the number was down another two cents and at the end of February the number has fallen to $4.78

The 2016 Zacks Consensus Estimate is also moving the wrong way, with estimates falling from $6.70 in September to the current level of $5.49

This drop in estimates has a lot to do with the two times the company guided below Wall Street estimates for revenue. This happened once in October, and again in January. Both times, the guidance was for 4Q, but was the third time in a row that guidance that came out was below consensus, as the company guided below the range in July as well.

Chart

The price and consensus chart has recently seen the addition of EPS surprises as well. The chat graphs the stock price along with the Zacks Consensus Estimates for the past several years to show how earnings estimates are a primary driver of stock prices. The recent drop in estimates have contributed to a falling stock price and investors would be wise to avoid buying this stock until the estimates turn around and head higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Air Methods: Zacks’ Bull of the Day Play

Air Methods (AIRMSnapshot Report) is a Zacks Rank #1 (Strong Buy), and as such, we know that earnings estimates are moving higher. The company is coming off a super strong earnings report in late February, so let’s take a look at that report and what other recent developments as it is the Bull of the DayBig Chopper Order

The company recently made one of the largest single private orders in the history of Bell Helicopter, a Textron Company. Air Methods signed a deal for 200 Bell 407GXP’s over a 10 year contract. To most observers, this is a big signal of long term strength for AIRM.

Company Description

Air Methods provides air medical emergency transport services and systems in the United States. Air Methods was founded in 1982 and is headquartered in Englewood, Colorado.

Earnings History

AIRM doesn’t have the best earnings history, but I really like the most recent quarter. So yes they have missed the Zacks Consensus Estimate in 4 of the last seven reports, but that last one, that last one was a good one. The company reported $0.61 when the Zacks Consensus Estimate was calling for $0.45. That means a $0.16 beat or a 35% positive earnings surprise and as a result the stock moved higher by 19%.

Earnings Estimates

Following the big beat, analysts have not really pushed estimates up that much, but over the last several months, numbers have improved. The 2015 Zacks Consensus Estimate moved up 4 cents following the recent beat, which is not much, but it is a good start. The 2016 Zacks Consensus Estimate moved from $3.14 in December to $3.25 in January and then to $3.36 in February. That is the kind of thing that can power a long term move higher in a stock.

Valuation

The valuation for AIRM is rather attractive, with the trailing PE of 21x just slightly higher than 19.2x industry average. The forward PE of 18x is right in line with the industry average, which is great for what I see coming down the road. The price to book multiple of 4.3x is well above the 2.4x industry average. Not to be out done, the price to sales multiple shows the largest premium with a 2x multiple compared to a 0.6x industry average.

I like the fact that AIRM is slated for top line growth of 6.5% this year while the industry is expected to show topline growth of less than 1%. The better than expected growth in revenue also translates to the bottom line with EPS expected to grow at 17.7% while the industry is looking at 7.5%. This is due to a net margin of 9.4% for AIRM compared to 3.4% for the industry average.

This Play

This play is about growth and valuation. The valuation is low and there is very likely going to be growth for this company. When we combine the two we have a strong possibility of seeing multiple expansion. With the stock trading in line to the industry right now, even a small premium of 5% more than the industry average could send this stock much, much higher.

P&C Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.