FutureFuel (FF – Free Report) is a name that is flying under the radar for most investors, so let’s take a look at the most recent earnings report and why I like this Zacks Rank #1 (Strong Buy) which happens to be the Bull of the Day.
Why I Like It
This is a small-cap stock, and small caps have been running lately.
A good earnings history when compared to the Zacks Consensus Estimate.
Recent jump of 8% in earnings estimates.
The Recent Numbers
I like to do a review of the most recent quarter for stocks that I highlight as Bulls of the Day. FF reported the September 2016 quarter last week and beat handily on the bottom line.
The company posted EPS of $0.29 when the Zacks Consensus Estimate was calling for $0.24. Revenue came in $17M below expectations for a 19% negative revenue surprise. As a result, the stock was bid up by more than 4.3% in the session following the report.
FutureFuel is a special purpose acquisition vehicle to acquire companies that are could make a notable impact in the biofuel and fuel industries. FF was previously known as the Chemicals Division of Eastman Kodak Company from 1976—1993.
The company has a good history of beating the Zacks Consensus Estimate. There have been two miss and five beats in the last seven reports.
The estimate picture looks really good, with the Zacks Consensus Estimate for 2016 moving from $1.00 in October to $1.08 in November. The single analyst estimate was as low as $0.90 back in February of this year.
The valuation for FF is one that I really like to see. The forward PE of 11.5x is well below the historic market multiple of around 18x. The Zacks Industry average multiple is a negative number, which suggests the competition for FF is going to be posting losses over the next twelve months. That is a huge positive for this stock as discerning investors may not even look at the other names as potentials to invest in. The company trades in line with the industry average in terms of price to book at 1.3x. Finally, the price to sales multiple of 2.5x is sharply higher than the industry average of 1x.
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 line 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.
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