Southern Copper (SCCO) is one of the stocks that Zacks.com visitors have been watching recently. Therefore, it may be a good idea to review some of the factors that may affect the near-term performance of a stock.
Over the past month, the miner’s shares have returned -10%, compared to a -2.4% change for the Zacks S&P 500 Composite. During that period, the Zacks Mining – Nonferrous industry, which includes Southern Copper, has lost 11.3 percent. Now the important question is: What could be the future direction of the stock?
Although media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and cause immediate price changes, there are always some underlying factors that ultimately drive buy and hold decisions. Let’s move on.
Here at Zacks, we prefer to gauge the change in a company’s future earnings estimates over anything else. This is because we believe that the present value of his future earnings determines the fair value of his stock.
Our analysis is primarily based on how sell-side analysts covering the stock are revising their earnings estimates keeping in mind the latest business trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when a stock’s fair value is higher than its current market value, investors buy the stock, causing its price to move upward. Because of this, empirical studies indicate a strong correlation between earnings estimate revisions and trends in short-term stock price movements.
For the current quarter, Southern Copper is expected to post earnings per share of $1.06, indicating a change of +86% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the past 30 days.
The consensus earnings estimate of $4.45 for the current fiscal year indicates a year-over-year change of +43.1%. This estimate has changed by +0.9% over the past 30 days.
For the next fiscal year, the consensus earnings estimate of $4.61 points to a +3.5% change from what Southern Copper is expected to report a year ago. Over the past month, estimates have changed by +0.9%.
With a strong externally audited track record, our proprietary stock rating tool, ZacksRank, provides a more definitive picture of near-term stock price direction, as it effectively harnesses the power of revisions to earnings estimates. does Due to the size of the recent change in consensus estimates, along with three other factors related to earnings estimates, Southern Copper is assigned a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s forward 12-month consensus EPS estimates:
Although revenue growth is the highest indicator of a company’s financial health, nothing happens if a business is unable to grow its revenue. After all, it is almost impossible for a company to grow its revenue over a long period of time without growing its revenue. Therefore, it is important to know the potential revenue growth of the company.
For Southern Copper, the consensus sales estimate for the current quarter of $2.85 billion indicates a year-over-year change of +24.2%. For the current and next fiscal years, estimates of $11.79 billion and $12.24 billion indicate changes of +19.1% and +3.9%, respectively.
Southern Copper reported revenue of $2.93 billion in the last reported quarter, representing a year-over-year change of +17%. EPS of $1.15 for the same period compares to $0.79 a year ago.
The reported revenue represented a -0.26% surprise, compared to the Zacks Consensus Estimate of $2.94 billion. EPS surprise was +2.68%.
Over the past four quarters, Southern Copper beat consensus EPS estimates three times. The company topped consensus earnings estimates by double the period.
Without considering stock valuation, no investment decision can be made effectively. In forecasting a stock’s future price performance, it is critical to determine whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
By comparing a company’s current values such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), historical values help determine whether Whether the stock is undervalued, overvalued, or undervalued, comparing the company against its peers on these parameters gives a good idea of its reasonableness. stock price.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and non-traditional valuation metrics for stocks graded A through F (an An is better than a B; a is better than a BC; and so on). ), is quite helpful in identifying whether a stock is overvalued, correctly valued, or temporarily undervalued.
Southern Copper is rated C on this front, indicating that it is trading in line with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.
The facts discussed here and many other information on Zacks.com can help determine whether or not Southern Copper’s market volatility is worth paying attention to. However, its Zacks Rank #3 suggests it may outperform the broader market in the near term.
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