Can AppFolio (APPF) Pull Off A Surprise In Q2 Earnings?

AppFolio, Inc. (NASDAQ:APPF) is set to report second-quarter 2016 results on Aug 8, 2016. Last quarter the company posted a negative earnings surprise of 10%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Goleta, CA-based AppFolio offers cloud-based software solutions for property management and legal industries. The company launched its IPO in June last year.

Notably, the company planned to use the proceeds to increase its financial flexibility and workforce as well as for research and development.

AppFolio’s first-quarter revenues surged 43.7% year over year to $23 million. Unfortunately, the company has a history of incurring losses. In the last quarter, the company suffered a loss of 11 cents per share compared with a loss of 41 cents per share reported in the year-ago period.

Nevertheless, the company has been able to significantly increase its revenues on a year-over-year basis and the trend should continue in the to-be-reported quarter as well.

Earnings Whispers

Our proven model does not conclusively show that AppFolio is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 11 cents. Hence, the difference is 0.00%.

Zacks Rank: AppFolio’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few companies worth considering which, as per our model, have the right combination of elements to post an earnings beat this quarter:

Alamos Gold, Inc. (TO:AGI) , with an Earnings ESP of +100.0% and a Zacks Rank #2

Sun Life Financial Inc. (TO:SLF) , with an Earnings ESP of +1.47% and a Zacks Rank #2

Vivint Solar, Inc. (NYSE:VSLR) , with an Earnings ESP of +1.79% and a Zacks Rank #3