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NetApp (NTAP) Soars to 52-Week High, Time to Cash Out?
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Have you been paying attention to shares of NetApp (NTAP - Free Report) ? Shares have been on the move with the stock up 4.9% over the past month. The stock hit a new 52-week high of $94.69 in the previous session. NetApp has gained 42.5% since the start of the year compared to the 22.6% move for the Zacks Computer and Technology sector and the 24.3% return for the Zacks Computer- Storage Devices 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 August 25, 2021, NetApp reported EPS of $1.15 versus consensus estimate of $0.95 while it beat the consensus revenue estimate by 1.58%.
For the current fiscal year, NetApp is expected to post earnings of $4.99 per share on $6.25 billion in revenues. This represents a 22.91% change in EPS on an 8.79% change in revenues. For the next fiscal year, the company is expected to earn $5.52 per share on $6.63 billion in revenues. This represents a year-over-year change of 10.53% and 6.06%, respectively.
Valuation Metrics
NetApp 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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
NetApp has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 18.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 22.1X versus its peer group's average of 17.2X. Additionally, the stock has a PEG ratio of 2.15. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, NetApp 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 NetApp meets the list of requirements. Thus, it seems as though NetApp shares could have potential in the weeks and months to come.
How Does NetApp Stack Up to the Competition?
Shares of NetApp have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Lantronix (LTRX - Free Report) , Seiko Epson (SEKEY - Free Report) , and HP (HPQ - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for NetApp. Still, the fundamentals for NetApp are promising, and it still has potential despite being at a 52-week high.
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NetApp (NTAP) Soars to 52-Week High, Time to Cash Out?
Have you been paying attention to shares of NetApp (NTAP - Free Report) ? Shares have been on the move with the stock up 4.9% over the past month. The stock hit a new 52-week high of $94.69 in the previous session. NetApp has gained 42.5% since the start of the year compared to the 22.6% move for the Zacks Computer and Technology sector and the 24.3% return for the Zacks Computer- Storage Devices 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 August 25, 2021, NetApp reported EPS of $1.15 versus consensus estimate of $0.95 while it beat the consensus revenue estimate by 1.58%.
For the current fiscal year, NetApp is expected to post earnings of $4.99 per share on $6.25 billion in revenues. This represents a 22.91% change in EPS on an 8.79% change in revenues. For the next fiscal year, the company is expected to earn $5.52 per share on $6.63 billion in revenues. This represents a year-over-year change of 10.53% and 6.06%, respectively.
Valuation Metrics
NetApp 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. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
NetApp has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 18.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 22.1X versus its peer group's average of 17.2X. Additionally, the stock has a PEG ratio of 2.15. 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 look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, NetApp 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 NetApp meets the list of requirements. Thus, it seems as though NetApp shares could have potential in the weeks and months to come.
How Does NetApp Stack Up to the Competition?
Shares of NetApp have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Lantronix (LTRX - Free Report) , Seiko Epson (SEKEY - Free Report) , and HP (HPQ - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for NetApp. Still, the fundamentals for NetApp are promising, and it still has potential despite being at a 52-week high.