Jamba Inc. (JMBA – Snapshot Report) is once again a Zacks #5 Rank and this will mark the fourth occasion I’ve written about this fact, first when shares were above $17 and most recently in November when they were above $13. But this has nothing to do with the tastiness or quality of their healthy beverage offerings.
Remember, the Zacks Rank is a purely quantitative model that compares the earnings momentum, based on analyst EPS estimate revisions, of over 4,000 stocks every day.
So for a stock to become a top-ranked Zacks #1 — and only the top 5% of stocks can do so — the agreement among analysts and the magnitude of their upward revisions must be sufficiently positive.
Conversely, for a stock to become a bottom-ranked Zacks #5 — again, only the bottom 5% of stocks get this punishment — the agreement among analysts is still important and it’s the EPS estimates that will be found taking a turn for the worse.
To see why Jamba has become a Zacks #5 Rank so frequently, you need only look at the proprietary Price & Consensus chart to see the repeating pattern of estimates being lowered each year…
Specifically, 2016 full-year EPS estimates have dropped from $0.52 to $0.45 in the last 60 days. This represents 170% annual growth in profits, but that’s compared to that downward sloping blue line. Not a pretty picture of “growth.”
Here’s what I said in November when shares were trading above $13…
Jamba may have a bright future. The stock of this $200 million company certainly hasn’t cratered to oblivion and merely trades in a big range these past few years between $10 and $17. But until the estimates turn back upward, I’d put my money on shares visiting the lower end of that range before the upper end.
Last week, JMBA made a new 18-month low under $11.50. Maybe the stock is bouncing off the bottom of its big range with an exciting new CEO coming onboard. David Pace comes from Bloomin’ Brands (BLMN – Snapshot Report) and also had held executive positions at Starbucks (SBUX – Analyst Report), PepsiCo (PEP – Analyst Report), and Yum! Brands (YUM – Analyst Report).
Plus the stock has 30% short interest that makes it “ripe for a squeeze.” But I’m still waiting for the estimates to stop going down before considering that juicy play.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.
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