SmarFinancial SMBK, a bank holding company, has recently received a significant upgrade to a Zacks Rank #1 (Strong Buy). This upgrade is not just a random occurrence; it signifies a strong positive trend in the company’s earnings estimates, a crucial factor that drives stock prices.
The Zacks Rank system, widely regarded as a reliable indicator of near-term stock performance, focuses solely on a company’s changing earnings picture. It tracks the consensus of earnings per share (EPS) estimates from analysts covering the stock, known as the Zacks Consensus Estimate, for both the current and following years.
Why are earnings estimates so important? Because they reflect a company’s future earnings potential, which is directly linked to the near-term price movement of its stock. This relationship is further strengthened by the influence of institutional investors, who heavily rely on earnings and estimates to determine the fair value of a company’s shares.
In simple terms, when earnings estimates rise, it signals an improvement in a company’s underlying business. This improvement attracts institutional investors, who, in turn, buy the stock, pushing its price higher.
The Zacks Rank system, through its meticulous analysis of earnings estimate revisions, effectively harnesses the power of this trend. It categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), based on four key factors related to earnings estimates.
The system has a proven track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988.
SmarFinancial’s upgrade to a Zacks Rank #1 signifies that analysts are increasingly optimistic about its earnings potential. For the fiscal year ending December 2024, analysts expect the company to earn $1.99 per share, a slight decrease from the previous year. However, this decrease is offset by the steady upward trend in estimates over the past three months, indicating a positive outlook.
The Zacks Rank system stands apart from conventional Wall Street analyst ratings by maintaining an equal balance between ‘buy’ and ‘sell’ ratings. Only the top 5% of the Zacks-covered stocks receive a ‘Strong Buy’ rating, and the next 15% receive a ‘Buy’ rating. Therefore, SmarFinancial’s placement in the top 20% of Zacks-covered stocks underscores its superior earnings estimate revision feature, making it a strong contender for delivering market-beating returns in the near term.
In conclusion, SmarFinancial’s upgrade to a Zacks Rank #1 positions it within the elite 5% of Zacks-covered stocks, highlighting its strong earnings potential and making it an attractive investment opportunity for those seeking near-term growth.
