Investors are always looking for stocks which have incredible potential in the near term. However, finding such a stock in the retail space can be difficult as the industry is extremely volatile and alters drastically in tandem with change in consumer buying trends.
Moreover, the markets have been on a roller coaster ride in the recent past, whether we blame the flagging Chinese economy, the eurozone debt crisis or the U.S. Federal Reserve’s pending decision over the first rate hike that has been put to rest (at least for now).
Despite the odds, we have been able to indentify one such company that stands out in and might prove to be a potential outperformer. That company is undoubtedly Best Buy Company, Inc. BBY. Here’s a discussion on the determinants of why we think that Best Buy has the potential to excel in the days to come:
Positive Earnings Surprise History
A look at Best Buy’s performance in the trailing seven quarters is sure to encourage investors, as this company has outperformed the Zacks Consensus Estimate by an average of 35.3% over this period. In the last concluded quarter, the company’s bottom line beat the Zacks Consensus Estimate by 44.1%.
Best Buy reported better-than-expected second-quarter fiscal 2016 results on Aug 25, wherein adjusted earnings from continuing operations came in at 49 cents, crushing the Zacks Consensus Estimate of 34 cents and the year-ago quarter figure of 42 cents.
Zacks Consensus Estimate Portrays an Uptrend
Clearly, positive sentiment is palpable among analysts as evident from the uptrend witnessed in the Zacks Consensus Estimate. Analysts polled by Zacks are now constructive on the stock’s future performance. Over the past 60 days, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 increased 5.9% to $2.68 per share and 4.7% to $2.92 per share, respectively.
Sturdy Growth Score
Who doesn’t want a portfolio that generates higher returns? However, it might be difficult for one to look at each parameter and compare with the peer group for an analysis on whether the stock is attractive from growth perspective. To make the task easy, Zacks has designed the new Style Score System.
The attractiveness of Best Buy as an investment option is also confirmed by its Growth Style Score of ‘A’. The Growth Style Score combines conventional growth metrics with a thorough analysis of the company’s income statement, balance sheet and statements of cash flows to evaluate its financial health and the sustainability of its growth trajectory. Back-tested results show that stocks with Growth Style Score of ‘A’ or ‘B’, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
Sturdy Fundamentals
Best Buy is a multinational specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services. The company is making extensive investments to upgrade its operations with special focus on developing omni-channel capacities and strengthening partnership with vendors.
The company has undertaken free shipping, introduced flash sales, expanded payment options and amplified the visibility of open-box and clearance inventory to boost the online business. Further, Best Buy’s “Renew Blue” program achieved tremendous success in fiscal 2015. Under the phase two of the plan, which commenced in fiscal 2016, the company intends to improve annualized operating income by $400 million over the next three years.
Zacks Rank
Best Buy currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks include Aaron's, Inc. AAN, Foot Locker, Inc. FL and hhgregg, Inc. HGG. While Aaron's and Foot Locker carry a Zacks Rank #1 (Strong Buy), hhgregg holds a Zacks Rank #2.
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 >>
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
Be the first to comment