Dropbox (DBX) Laps the Stock Market: Here's Why

In the latest close session, Dropbox (DBX) was up +1.46% at $35.56. The stock outpaced the S&P 500's daily gain of 0.86%. Elsewhere, the Dow gained 0.98%, while the tech-heavy Nasdaq added 0.96%.

Shares of the online file-sharing company witnessed a loss of 2.45% over the previous month, trailing the performance of the Computer and Technology sector with its loss of 0.56%, and the S&P 500's loss of 1.96%.

Analysts and investors alike will be keeping a close eye on the performance of Dropbox in its upcoming earnings disclosure. On that day, Dropbox is projected to report earnings of $0.73 per share, which would represent a year-over-year decline of 1.35%. At the same time, our most recent consensus estimate is projecting a revenue of $628.6 million, reflecting a 0.92% fall from the equivalent quarter last year.

For the full year, the Zacks Consensus Estimates are projecting earnings of $3.04 per share and revenue of $2.52 billion, which would represent changes of +7.04% and -0.1%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for Dropbox. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Our research demonstrates that these adjustments in estimates directly associate with imminent stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Over the past month, there's been a 0.43% rise in the Zacks Consensus EPS estimate. As of now, Dropbox holds a Zacks Rank of #5 (Strong Sell).

In terms of valuation, Dropbox is presently being traded at a Forward P/E ratio of 11.52. This represents a discount compared to its industry average Forward P/E of 15.96.

It is also worth noting that DBX currently has a PEG ratio of 3.28. Comparable to the widely accepted P/E ratio, the PEG ratio also accounts for the company's projected earnings growth. As the market closed yesterday, the Internet - Services industry was having an average PEG ratio of 1.48.

The Internet - Services industry is part of the Computer and Technology sector. This industry, currently bearing a Zacks Industry Rank of 200, finds itself in the bottom 19% echelons of all 250+ industries.

The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Don't forget to use Zacks.com to keep track of all these stock-moving metrics, and others, in the upcoming trading sessions.

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This article originally published on Zacks Investment Research (zacks.com).

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