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Will Accuray (ARAY) Gain on Rising Earnings Estimates?

Zacks Equity Research
·2-min read

Accuray (ARAY) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The upward trend in estimate revisions for this radiation oncology company 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. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

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 Accuray, 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.

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The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.02 per share for the current quarter, which represents a year-over-year change of +200%.

Over the last 30 days, the Zacks Consensus Estimate for Accuray has increased 50% because one estimate has moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $0.05 per share represents a change of +133.33% from the year-ago number.

The revisions trend for the current year also appears quite promising for Accuray, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 375%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Accuray currently carries a Zacks Rank #1 (Strong 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.

Bottom Line

Investors have been betting on Accuray because of its solid estimate revisions, as evident from the stock's 30.7% 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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Zacks Investment Research