HomeStreet (HMST) stocks have been performing well lately, with the stock rising 14.7% in the past month. The stock hit a new 52-week high of $ 47.56 in the previous session. HomeStreet is up 39.2% year-to-date compared to the 9.8% movement for the Zacks Finance sector and the 28.6% return for the Zacks Financial – Savings and Credit sector.
What drives outperformance?
The stock has an excellent track record of positive earnings surprises, as it hasn’t missed our consensus earnings estimate in any of the past four quarters. In its latest earnings report from Jan. 25, 2021, HomeStreet reported EPS of $ 1.47 versus a consensus estimate of $ 1.07, as it exceeded the consensus revenue estimate by 14.91%.
For the current fiscal year, HomeStreet is expected to post earnings of $ 4.04 per share on revenue of $ 342.39 million. This represents a variation of 16.43% of EPS on a variation of -4.37% of income. For the next fiscal year, the company is expected to earn $ 4.12 per share on $ 331.05 million in revenue. This represents a year-over-year change of 1.98% and -3.31%, respectively.
HomeStreet may be at a 52-week high right now, but what could the future hold for the action? A key aspect of this question is looking at valuation metrics to determine if the business is ahead of itself.
On this front, we can look at Zacks style scores, as they offer investors a variety of ways to browse stocks (beyond the Zacks rank of a stock). These styles are represented by ratings ranging from A to F in the Value, Growth, and Momentum categories, while there is also a combined VGM score. The idea behind style scores is to help investors choose the most appropriate Zacks Rank stocks based on their individual investing style.
HomeStreet has a value score of B. The growth and momentum scores are C and B respectively, giving the company a VGM score of B.
In terms of the distribution of value, the stock is currently trading at 11.6 times the current year’s EPS estimates. On a sliding cash flow basis, the stock is currently trading at 13.6X compared to its peer group’s 11.8X average. This is not enough to put the company in the top echelon of all the stocks we cover from a value perspective.
We also need to consider the Zacks ranking of the action, as it overrides any trend on the style score front. Fortunately, HomeStreet currently has a Zacks rank of # 2 (buy) thanks to rising profit estimates.
Given that we recommend that investors select stocks with the Zacks rank of 1 (strong buy) or 2 (buy) and style scores of A or B, it looks like HomeStreet is suitable. So, it looks like HomeStreet stocks could still be ripe for more earnings to come.
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