Earnings season is a great time to dive into stocks because there’s a certain amount of certainty that comes from all the related discussions.
This is when our expectations about the just-concluded quarter are met, exceeded or missed. It’s also when we get a somewhat clearer picture about the next quarter and at times, also the year. So jumping into stocks that have announced resounding beats and encouraging outlooks are a no-brainer.
It also pays to hang around a couple of days to see what impression brokers have come away with. And the best way that is captured is in the estimate revisions. So if management has good things to say about the company and its future and brokers come back with higher estimates, you know for sure that good things are going on.
But since you’ve waited for the broker reports, some of the good news is likely to be factored into the price already. So it’s better to check the valuations as well. Remember that shares move around a lot on sentiments and people often have their own reasons to buy or sell. So they could be above, below or at their reasonable valuations.
The following stocks were selected because in addition to the above, they are among the few that are still expected to grow in both the current year and the next-
DaVita is a leading provider of dialysis services in the U.S. to patients suffering from chronic kidney failure, also known as end stage renal disease (ESRD). The company operates kidney dialysis centers and provides related medical services primarily in dialysis centers and in contracted hospitals across the U.S. Its services include outpatient dialysis services, hospital inpatient dialysis services and ancillary services such as ESRD laboratory services and disease management services.
Zacks Rank #1
VGM Score A
Industry: Medical - Outpatient and Home Healthcare (top 37%)
June quarter earnings beat by 51.2% (reported 1.95 compared to the estimated $1.29)
Estimate revision trend: 2020 estimate up 22 cents (3.6%) in the last 7 days, 2021 estimate up 8 cents (1.2%)
Revenue is expected to grow 2.0% this year and 2.7% in the next. Earnings are expected to grow 17.6% this year and 3.1% in the next.
Valuation: The 0.87X P/S multiple is close to the median value of 0.83 and significantly lower than the annual high of 1.00X. Its current P/E of 12.85X is close to the median value of 12.65, suggesting upside from these levels. That’s particularly true because the S&P 500 is trading at its annual high on both counts.
PayPal Holdings, Inc. PYPL
PayPal has emerged as one of the largest online payment solutions providers on the back of its strong product portfolio that helps it facilitate smooth and secure transactions for both customers and merchants. The primary driver of revenues at this point is its peer-to-peer payment services unit Venmo, a business it acquired a few years back.
Zacks Rank #1
VGM Score B
Industry: Internet – Software (top 42%)
June quarter earnings beat by 27.4% (reported $1.07 instead of the estimated 84 cents)
Estimate revision trend: 2020 estimate up 33 cents (9.9%) and 2021 estimate up 34 cents (8.3%) in the last 7 days
Revenue is expected to grow 20.2% this year and 18.0% in the next. Earnings are expected to grow 18.1% this year and 21.6% in the next.
Valuation: The current P/E multiple of 51.22X is closer to the median value of 41.36X than the annual high of 67.85X. It’s closer to the annual high on the basis of forward sales. But since the S&P is trading at its annual high on both counts, additional upside seems likely.
Century Communities (NYSE:CCS), Inc. CCS
Century Communities is a home building and construction company involved in land acquisition, development and entitlements as well as the acquisition, development, construction, marketing and sale of single-family detached and attached residential home projects. The Company operates in major metropolitan markets in Colorado, Texas and Nevada.
Zacks Rank #1
VGM Score A
Industry: Building Products - Home Builders (top 1%)
June quarter earnings beat by 65.8% (reported $1.21 instead of the estimated 73 cents)
Estimate revision trend: 2020 estimate up 87 cents (24.5%) in the last 7 days, 2021 estimate up $1.03 (26.1%)
Revenue is expected to grow 15.8% in 2020 and 9.0% in 2021. Earnings are expected to grow 9.1% in 2020 and 12.6% in 2021.
Valuation: The 0.41X P/S multiple is between its median value of 0.36X and annual high of 0.48X while the current P/E multiple of 8.75X is closer to its median value of 7.02X than its annual high of 10.10X. The S&P 500 trading at its annual high indicates upside potential.
Berry Global Group (NYSE:BERY), Inc. BERY
Berry Global Group manufactures and distributes nonwoven specialty materials, engineered materials and consumer packaging products to personal care, healthcare, and food and beverage customers in North and South America, Asia and Europe.
Zacks Rank #1
VGM Score A
Industry: Containers - Paper and Packaging (NYSE:PKG) (top 18%)
June quarter earnings beat by 28.8% (reported $1.52 compared to $1.18 estimate)
Estimate revision trend: Both 2020 and 2021 estimates have increased by a respective 10 cents in the last 7 days.
Revenue is expected to grow 31.6% this year and 0.9% in the next. Earnings are expected to grow 22.6% this year and 14.5% in the next.
Valuation: The 0.59X P/S multiple is above the median value of 0.49X, but still below its annual high of 0.63X, so there is upside potential.
Turning Point Brands (NYSE:TPB), Inc. TPB
Turning Point Brands provides tobacco products including moist snuff, loose leaf chewing tobacco, cigarette papers, make-your-own cigar wraps and cigar smoking tobacco, cigars and liquid and tobacco vapour. Its portfolio of brands includes Zig-Zag, Beech-Nut and Stoker's.
Zacks Rank #1
VGM Score B
Industry: Tobacco (top 14%)
June quarter earnings beat by 31.5% (reported 71 cents compared to estimated 54 cents)
Estimate revision trend: 2020 estimate up 41 cents (up 19.7%) in the last 7 days, 2021 estimate up 38 cents (17.9%).
Revenue is expected to grow 3.8% this year and 4.4% in the next. Earnings are expected to grow 33.9% this year and 0.4% in the next.
Valuation: The 1.63X P/S multiple is between the median value of 1.37 and the high of 1.92X. Its current P/E of 15.13X is also between the median value of 12.70X and 17.11X. This is not too bad considering the the S&P 500 is trading at its annual high. So upside potential exists.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft (NASDAQ:MSFT) in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
DaVita Inc. (DVA): Free Stock Analysis Report
Century Communities, Inc. (CCS): Free Stock Analysis Report
Berry Global Group, Inc. (BERY): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Turning Point Brands, Inc. (TPB): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research