Investors might want to bet on PagerDuty (PD), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
The upward trend in estimate revisions for this software developer reflects growing optimism of analysts on its earnings prospects, which 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 PagerDuty, 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
The earnings estimate of $0.09 per share for the current quarter represents a change of +325% from the number reported a year ago.
The Zacks Consensus Estimate for PagerDuty has increased 18.18% 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 $0.46 per share for the full year, which represents a change of +557.14% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for PagerDuty. Over the past month, three estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 9.52%.
Favorable Zacks Rank
Thanks to promising estimate revisions, PagerDuty currently carries 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.
Investors have been betting on PagerDuty because of its solid estimate revisions, as evident from the stock's 10.8% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.
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