As one of the most searched-for stocks on Zacks.com lately, Hologic (HOLX) is certainly worth taking a closer look at. Over the past month, shares have returned -2.7%, compared to the Zacks S&P 500 composite’s -1.7% change. The key question now is: What could be the stock’s future direction?
Revisions to Earnings Estimates
At Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.
We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors’ interest in buying the stock, leading to its price moving higher.
This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
Hologic’s Earnings Estimates
For the current quarter, Hologic is expected to post earnings of $1.01 per share for the current quarter, representing a year-over-year change of +3.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.9%.
For the current fiscal year, the consensus earnings estimate of $4.28 points to a change of +4.9% from the prior year. Over the last 30 days, this estimate has remained unchanged.
For the next fiscal year, the consensus earnings estimate of $4.66 indicates a change of +8.8% from what Hologic is expected to report a year ago. Over the past month, the estimate has changed -0.4%.
The Zacks Rank
Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions.
Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Hologic is rated Zacks Rank #3 (Hold).
The Evolution of Forward 12-Month Consensus EPS Estimate
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimate:
### Chart: Forward 12-Month Consensus EPS Estimate
| Quarter | 2022E | 2023E | 2024E |
| --- | --- | --- | --- |
| Q1 | $0.99 | $1.05 | $1.13 |
| Q2 | $1.01 | $1.07 | $1.15 |
| Q3 | $1.04 | $1.10 | $1.18 |
| Q4 | $1.06 | $1.13 | $1.21 |
12-Month EPS Projected Revenue Growth
Even though a company’s earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It’s almost impossible for a company to grow its earnings without growing its revenue for long periods.
Therefore, knowing a company’s potential revenue growth is crucial.
For Hologic, the consensus sales estimate for the current quarter of $1.03 billion indicates a year-over-year change of +1.4%. For the current and next fiscal years, $4.17 billion and $4.46 billion are estimated respectively.
Zacks Value Style Score
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.
Hologic is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
The Bottom Line
The facts discussed here and much other information on Zacks.com might help determine whether or not it’s worthwhile paying attention to the market buzz about Hologic. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
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