DraftKings (DKNG) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The upward trend in estimate revisions for this company 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
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.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for DraftKings, as there has been strong agreement among the covering analysts in raising estimates.
For the current quarter, the company is expected to earn $0.25 per share, which is a change of +183.33% from the year-ago reported number.
Over the last 30 days, one estimate has moved higher for DraftKings while one has gone lower. As a result, the Zacks Consensus Estimate has increased 10.35%.
For the full year, the earnings estimate of $1.51 per share represents a change of +243.81% from the year-ago number.
The revisions trend for the current year also appears quite promising for DraftKings, with three estimates moving higher over the past month compared to one negative revision. The consensus estimate has also received a boost over this time frame, increasing 80.32%.
The promising estimate revisions have helped DraftKings earn a Zacks Rank #2 (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. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
While strong estimate revisions for DraftKings have attracted decent investments and pushed the stock 10.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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This article originally published on Zacks Investment Research (zacks.com).
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