Monday.com (MNDY) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The upward trend in estimate revisions for this project management software developer 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. This insight is at the core of our stock rating tool -- the Zacks Rank.
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 Monday.com, 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.
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 $1.26 per share for the current quarter, which represents a year-over-year change of +8.6%.
Over the last 30 days, two estimates have moved higher for Monday.com compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 65%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $5.07 per share, representing a year-over-year change of +15.2%.
The revisions trend for the current year also appears quite promising for Monday.com, with five 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 31.51%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Monday.com 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.
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 Monday.com because of its solid estimate revisions, as evident from the stock's 6.5% 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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