Is CoreCard (CCRD) Outperforming Other Business Services Stocks This Year?

Have you been paying attention to shares of CoreCard Corporation (CCRD)? Shares have been on the move with the stock up 43% over the past month. The stock hit a new 52-week high of $17.82 in the previous session. CoreCard Corporation has gained 28.3% since the start of the year compared to the 27% move for the Zacks Business Services sector and the 53.8% return for the Zacks Technology Services 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 October 31, 2024, CoreCard reported EPS of $0.3 versus consensus estimate of $0.17 while it beat the consensus revenue estimate by 17.19%.

For the current fiscal year, CoreCard is expected to post earnings of $0.61 per share on $55.98 million in revenues. This represents a 17.31% change in EPS on a -0.04% change in revenues. For the next fiscal year, the company is expected to earn $0.92 per share on $62.8 million in revenues. This represents a year-over-year change of 50.82% and 12.18%, respectively.

Valuation Metrics

CoreCard 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 these give investors a variety of ways to comb 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.

CoreCard has a Value Score of B. The stock's Growth and Momentum Scores are C and F, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 29.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 26.3X. On a trailing cash flow basis, the stock currently trades at 14.1X versus its peer group's average of 12.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, CoreCard currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

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 CoreCard meets the list of requirements. Thus, it seems as though CoreCard shares could have a bit more room to run in the near term.

How Does CCRD Stack Up to the Competition?

Shares of CCRD 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 Outbrain Inc. (OB). OB has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of C.

Earnings were strong last quarter. Outbrain Inc. beat our consensus estimate by 450%, and for the current fiscal year, OB is expected to post earnings of $0.30 per share on revenue of $237.8 million.

Shares of Outbrain Inc. have gained 6% over the past month, and currently trade at a forward P/E of 41.33X and a P/CF of 18.8X.

The Technology Services industry is in the top 26% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CCRD and OB, even beyond their own solid fundamental situation.

Zacks Investment Research

CoreCard Corporation (CCRD) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.

The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.

Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts, since these are mostly driven by subjective factors that are hard to see and measure in real time. In these situations, the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.

Therefore, the Zacks rating upgrade for CoreCard basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company's future earnings potential, as reflected in earnings estimate revisions, has proven to be strongly correlated with the near-term price movement of its stock. That's partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company's shares. An increase or decrease in earnings estimates in their valuation models simply results in 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 price movement for the stock.

For CoreCard, rising earnings estimates and the consequent rating upgrade fundamentally mean an improvement in the company's underlying business. And investors' appreciation of this improving business trend should push the stock higher.

Harnessing the Power of Earnings Estimate Revisions

Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, so it could be truly rewarding if such revisions are tracked for making an investment decision. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify 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 complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earnings Estimate Revisions for CoreCard

For the fiscal year ending December 2024, this company is expected to earn $0.61 per share, which is a change of 17.3% from the year-ago reported number.

Analysts have been steadily raising their estimates for CoreCard. Over the past three months, the Zacks Consensus Estimate for the company has increased 4.2%.

Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of 'buy' and 'sell' ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a 'Strong Buy' rating and the next 15% get a 'Buy' rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

The upgrade of CoreCard to a Zacks Rank #1 positions it in the top 5% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

Zacks Investment Research

Have you been paying attention to shares of OppFi Inc. (OPFI)? Shares have been on the move with the stock up 38.3% over the past month. The stock hit a new 52-week high of $6.87 in the previous session. OppFi Inc. has gained 27% since the start of the year compared to the 27.5% move for the Zacks Business Services sector and the 21.7% return for the Zacks Financial Transaction Services industry.

What's Driving the Outperformance?

The stock has an impressive 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 November 7, 2024, OppFi reported EPS of $0.33 versus consensus estimate of $0.21.

For the current fiscal year, OppFi is expected to post earnings of $0.86 per share on $515.01 million in revenues. This represents a 68.63% change in EPS on a 1.19% change in revenues. For the next fiscal year, the company is expected to earn $0.86 per share on $540.27 million in revenues. This represents a year-over-year change of 0% and 4.9%, respectively.

Valuation Metrics

OppFi 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 these give investors a variety of ways to comb 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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

OppFi has a Value Score of A. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 7.6X current fiscal year EPS estimates, which is not in-line with the peer industry average of 17.5X. On a trailing cash flow basis, the stock currently trades at 12.3X versus its peer group's average of 11.2X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, OppFi currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

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 OppFi fits the bill. Thus, it seems as though OppFi shares could have a bit more room to run in the near term.

Zacks Investment Research

When it comes to short-term investing or trading, they say "the trend is your friend." And there's no denying that this is the most profitable strategy. But making sure of the sustainability of a trend to profit from it is easier said than done.

The trend often reverses before exiting the trade, leading to a short-term capital loss for investors. So, for a profitable trade, one should confirm factors such as sound fundamentals, positive earnings estimate revisions, etc. that could keep the momentum in the stock alive.

Our "Recent Price Strength" screen, which is created on a unique short-term trading strategy, could be pretty useful in this regard. This predefined screen makes it really easy to shortlist the stocks that have enough fundamental strength to maintain their recent uptrend. Also, the screen passes only the stocks that are trading in the upper portion of their 52-week high-low range, which is usually an indicator of bullishness.

OppFi Inc.

(OPFI) is one of the several suitable candidates that passed through the screen. Here are the key reasons why it could be a profitable bet for "trend" investors.

A solid price increase over a period of 12 weeks reflects investors' continued willingness to pay more for the potential upside in a stock. OPFI is quite a good fit in this regard, gaining 45.4% over this period.

However, it's not enough to look at the price change for around three months, as it doesn't reflect any trend reversal that might have happened in a shorter time frame. It's important for a potential winner to maintain the price trend. A price increase of 38.3% over the past four weeks ensures that the trend is still in place for the stock of this company.

Moreover, OPFI is currently trading at 91.9% of its 52-week High-Low Range, hinting that it can be on the verge of a breakout.

Looking at the fundamentals, the stock currently carries a Zacks Rank #2 (Buy), which means it is in the top 20% of more than the 4,000 stocks that we rank based on trends in earnings estimate revisions and EPS surprises -- the key factors that impact a stock's near-term price movements.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify 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 complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Another factor that confirms the company's fundamental strength is its Average Broker Recommendation of #1 (Strong Buy). This indicates that the brokerage community is highly optimistic about the stock's near-term price performance.

So, the price trend in OPFI may not reverse anytime soon.

In addition to OPFI, there are several other stocks that currently pass through our "Recent Price Strength" screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.

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Zacks Investment Research