Market expects investment in Saratoga (SARs – Free report) delivers year-over-year revenue growth with higher revenue when reporting results for the quarter ended November 2022. Its short-term stock price is how actual results compare to those estimates.
If these key numbers outperform expectations in the upcoming earnings call, which is expected to be released on January 10, the stock could rise.
While management’s discussion of business conditions on earnings calls largely determines the sustainability of near-term price movements and future earnings expectations, it is valuable to have handicapping insight into the odds of a positive EPS surprise. there is.
Sachs’ Consensus Estimation
The business development firm is expected to post quarterly earnings of $0.67 per share in its next report, representing a +26.4% change year over year.
Revenue is expected to be $23.87 million, up 44.7% from the same period last year.
Estimated Modified Trend
Consensus EPS estimates for the quarter were revised down 1.37% to current levels over the past 30 days. This essentially reflects how the covering analysts collectively reassessed their original estimates for this period.
Investors should keep in mind that the direction of revisions to estimates by each analyst covered may not necessarily be reflected in the overall change.
Earnings whisper
By revising forecasts before a company announces its financial results, it becomes a clue to know the economy during the period when financial results are announced. This insight is at the core of our proprietary surprise prediction model, Zacks Earnings ESP (Expected Surprise Prediction).
Zacks Earnings ESP compares the most accurate estimate to the quarterly Zacks Consensus estimate. The Most Accurate Estimate is the latest version of the Zacks Consensus EPS Estimate. The idea here is that analysts who revise their estimates just before the earnings release have the most up-to-date information. This may be more accurate than previously predicted by analysts and others contributing to the consensus.
Therefore, positive or negative earnings ESP readings theoretically indicate a high probability of real earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP measures.
A positive earnings ESP is a strong predictor of earnings beats, especially when combined with Zacks ranks 1 (strong buy), 2 (buy), or 3 (hold). Our research shows that this combination of stocks creates a positive surprise almost 70% of the time, and a solid Zacks rank actually increases the predictive power of the Earnings ESP.
Note that a negative Earnings ESP number does not indicate a loss of revenue. Our research shows that it is difficult to predict profits with any degree of confidence for stocks with a negative Earnings ESP and/or a Zacks Rank of 4 (sell) or 5 (strong sell). It has been.
How did the investment numbers for Saratoga form?
For Saratoga Investment, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting analysts have been bullish about the company’s earnings outlook lately. This resulted in a revenue ESP of +3.50%.
On the other hand, the stock is currently ranked 3rd in the Zacks rank.
The combination therefore indicates that Saratoga Investments is most likely to beat the consensus EPS estimate.
Does the earnings surprise history hold any clues?
Analysts often consider how well they have been able to match past consensus estimates when calculating estimates of a company’s future earnings. Therefore, it’s worth looking at the history of surprises to gauge their impact on future numbers.
In its last reported quarter, Saratoga Investments, which was expected to post earnings of $0.53 per share, actually generated earnings of $0.58, a surprise +9.43%.
In the past four quarters, the company has beaten consensus EPS estimates just once.
Conclusion
Increases or decreases in earnings may not be the only reason a stock price rises or falls. Many stocks end up falling despite their strong performance due to other factors that disappoint investors. Similarly, unexpected catalysts have seen many stocks rise despite failing to generate earnings.
That said, betting on stocks that are expected to outperform earnings expectations increases your odds of success. This is why it’s worth checking out the company’s Earnings ESP and Zacks Rank ahead of each quarterly release. Take advantage of the Earnings ESP filter to find the best stocks to buy or sell before they’re reported. .
Saratoga Investments appears to be a strong contender with outperforming earnings. However, investors should also pay attention to other factors to bet on this stock or stay away from it before the earnings announcement.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
