Cognex Corporation (CGNX) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Cognex Corporation, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $0.50 per share, which is a change of +51.5% from the year-ago reported number.
The Zacks Consensus Estimate for Cognex has increased 41.61% over the last 30 days, as three estimates have gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $1.65 per share for the full year, which represents a change of +61.8% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Cognex. Over the past month, six estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 13.41%.
Favorable Zacks Rank
The promising estimate revisions have helped Cognex earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Cognex have attracted decent investments and pushed the stock 6.8% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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Cognex Corporation (CGNX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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