Hims & Hers Health, Inc. (HIMS) recently made it onto Zacks.com's list of Most Searched Stocks, therefore, it may be advisable to consider some key factors that could impact this stock's performance in the near future.
Over the past month, the company's shares have returned -24.7% compared to a -4.5% change for the Zacks S&P 500 Composite Index. The Zacks Medical Information Systems industry, which Hims & Hers Health belongs to, has gained 7.4% during that period.The big question here is, what is the direction of this stock going forward?
Media announcements or rumors of significant changes in a company's business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we prioritize evaluating the changing earnings estimates for a company, rather than focusing on other things, because we believe the fair value of a stock is determined by the present value of its future earnings stream.
It essentially looks at how sell-side analysts covering the stock are revising their earnings forecasts to reflect the impact of the latest business trends. As a company's earnings forecasts rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be interested in buying the stock, driving the share price up. This is why empirical studies have shown a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
Hims & Hers Health is expected to post earnings of $0.06 per share for the current quarter, which would represent a +250% change from the year-ago period. Over the past 30 days, the Zacks Consensus Estimate has changed +14.4%.
The consensus revenue estimate for the current fiscal year is $0.22, indicating a change of +300% year-over-year. This estimate has changed +7.9% over the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $0.38, representing a +73.1% change from what Hims & Hers Health was expected to report a year ago. Over the past month, estimates have changed -1.6%.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions and provides a more robust view of near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, has earned Hims & Hers Health a Zacks Rank #3 (Hold).
The story continues
The chart below shows the evolution of the company's consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
A company's earnings growth is arguably the best indicator of a company's financial health, but nothing happens if the company can't grow earnings. It's nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company's earnings growth potential is very important.
For Hims & Hers Health, the revenue consensus estimate for the current quarter is $378.82 million, indicating a change of +67.1% year-over-year. For the current and next fiscal years, estimates of $1.39 billion and $1.9 billion indicate changes of +59.8% and +36.1%, respectively.
Last reported results and surprise history
Hims & Hers Health reported revenue of $315.65 million for the most recent quarter, up +51.8% year over year. EPS was $0.06 for the same period, compared to -$0.03 in the same period last year.
Compared to the Zacks Consensus Estimate of $304.7 million, reported revenues represented a surprise of +3.59%. EPS surprise was +20%.
Over the last four quarters, Hims & Hers Health has surpassed consensus EPS estimates three times, and the company has topped consensus revenue estimates each time during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock's current price properly reflects the intrinsic value of its business and the company's growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company's valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S) and Price to Cash Flow (P/CF) with the company's historical values helps in determining whether the stock is fairly valued, overvalued or undervalued, while comparing a company with its peers on the basis of these parameters gives a good sense of the fairness of the stock's valuation.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
Hims & Hers Health is rated a C in this regard, indicating that it is trading in line with its peers. Click here to see the values of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether the market buzz surrounding Hims & Hers Health is worth following, although its Zacks Rank #3 suggests it may be capable of performing in line with the broader market in the near term.
Want the latest recommendations from Zacks Investment Research? Download today: 7 Best Stocks for the Next 30 Days Click to get this free report.
Hims & Hers Health, Inc. (HIMS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
