Have you been paying attention to shares of Skyline (SKY)? Shares have been on the move with the stock up 7.8% over the past month. The stock hit a new 52-week high of $75.4 in the previous session. Skyline has gained 44.3% since the start of the year compared to the 8.7% move for the Zacks Construction sector and the 20.5% return for the Zacks Building Products - Mobile Homes and RV Builders industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 6, 2023, Skyline reported EPS of $1.44 versus consensus estimate of $0.97.
For the current fiscal year, Skyline is expected to post earnings of $6.74 per share on $2.63 billion in revenues. This represents a 55.66% change in EPS on a 19.01% change in revenues. For the next fiscal year, the company is expected to earn $4.18 per share on $2.32 billion in revenues. This represents a year-over-year change of -37.91% and -11.69%, respectively.
Skyline may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Skyline has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 11X current fiscal year EPS estimates, which is not in-line with the peer industry average of 11X. On a trailing cash flow basis, the stock currently trades at 15.7X versus its peer group's average of 5X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Skyline currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Skyline passes the test. Thus, it seems as though Skyline shares could have a bit more room to run in the near term.
How Does SKY Stack Up to the Competition?
Shares of SKY have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Cavco Industries, Inc. (CVCO). CVCO has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. Cavco Industries, Inc. beat our consensus estimate by 13.85%, and for the current fiscal year, CVCO is expected to post earnings of $25.59 per share on revenue of $2.2 billion.
Shares of Cavco Industries, Inc. have gained 7.4% over the past month, and currently trade at a forward P/E of 11.37X and a P/CF of 15.98X.
The Building Products - Mobile Homes and RV Builders industry is in the top 41% of all the industries we have in our universe, so it looks like there are some nice tailwinds for SKY and CVCO, even beyond their own solid fundamental situation.
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