Dover Corporation (DOV) seems like an attractive choice, as it was recently upgraded to Zacks Rank # 1 (strong buy). This upgrade is essentially a reflection of an upward trend in earnings estimates – one of the most powerful forces impacting stock prices.
The only determinant of the Zacks rating is the evolution of a company’s profits. The Zacks Consensus Estimate – the consensus of sales analysts’ EPS estimates covering the stock – for the current and subsequent years is tracked by the system.
Since a changing picture of earnings is a powerful factor influencing short-term stock price movements, Zacks’ rating system is very useful for individual investors. They may find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are primarily driven by subjective factors that are difficult to see and measure in real time.
Therefore, Zacks’ rating upgrade for Dover Corporation essentially reflects the positivity of its earnings outlook, which could translate into buying pressure and an increase in its share price.
The Most Powerful Force Impacting Stock Prices
There is evidence that the change in a company’s future earnings potential, as reflected in revisions to earnings estimates, and the short-term price movement of its stocks are strongly correlated. Part of the reason for this is the influence of institutional investors who use profit and profit estimates to calculate the fair value of a company’s shares. An increase or decrease in earnings estimates in their valuation models simply results in a higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of shares then leads to a price movement for the stock.
For Dover Corporation, the rise in earnings estimates and the consequent rating upgrade fundamentally means an improvement in the underlying business of the company. And investor appreciation of this improving trade trend should push the stock higher.
Harnessing the Power of Revisions to Income Estimates
Empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock movements, so it could be really rewarding if these revisions are followed to make an investment decision. This is where Zacks Rank’s proven stock rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.
Zacks Rank’s stock rating system, which uses four factors related to earnings estimates to rank stocks into five groups, ranging from Zacks Rank # 1 (Strong Buy) to Zacks Rank # 5 (Strong Sell), has an impressive externally audited track. record, with Zacks Rank # 1 stocks generating an average annual return of + 25% since 1988. You can see the full list of current Zacks # 1 Rank (Strong Buy) stocks here >>>>.
Revised profit estimate for Dover Corporation
This company is expected to earn $ 6.91 per share for the year ending December 2021, which represents a year-over-year change of 21.9%.
Analysts have steadily increased their estimates for Dover Corporation. Over the past three months, Zacks’ consensus estimate for the company has risen 9%.
At the end of the line
Unlike overly optimistic Wall Street analysts whose rating systems tend to be weighted towards favorable recommendations, Zacks’ rating system maintains an equal proportion of “ buy ” and “ sell ” ratings across the board. of its universe of more than 4000 shares at any time. Regardless of market conditions, only the richest 5% of stocks covered by Zacks get a “Strong Buy” rating and the next 15% a “Buy” rating. Thus, placing a stock in the top 20% of stocks covered by Zacks indicates its superior earnings estimate review function, making it a strong candidate for producing above-market returns in the short term.
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Dover Corporation’s upgrade to Zacks’ # 1 rank places it in the top 5% of stocks covered by Zacks in terms of estimate revisions, implying that the stock could rise in the near term.
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