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Can StoneCo Ltd. (STNE) Run Higher on Rising Earnings Estimates?

Zacks Equity Research
·2 min read

StoneCo Ltd. (STNE) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this company is driving estimates higher, 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 StoneCo Ltd. There has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

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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 $0.10 per share for the current quarter, which represents a year-over-year change of +400%.

The Zacks Consensus Estimate for StoneCo Ltd. has increased 54.54% over the last 30 days, as one estimate has gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $0.35 per share represents a change of +191.67% from the year-ago number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, one estimate has moved up for StoneCo Ltd. versus no negative revisions. This has pushed the consensus estimate 66.67% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, StoneCo Ltd. currently carries 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.

Bottom Line

Investors have been betting on StoneCo Ltd. because of its solid estimate revisions, as evident from the stock's 10.2% 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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StoneCo Ltd. (STNE) : Free Stock Analysis Report

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Zacks Investment Research