Ultra Clean Holdings (UCTT) 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.
Analysts' growing optimism on the earnings prospects of this chipmaking equipment services 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. 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.
For Ultra Clean Holdings, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
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 $0.53 per share for the current quarter, which represents a year-over-year change of +96.3%.
Over the last 30 days, the Zacks Consensus Estimate for Ultra Clean has increased 60.71% because one estimate has moved higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $2.35 per share, representing a year-over-year change of +123.8%.
The revisions trend for the current year also appears quite promising for Ultra Clean, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 29.94%.
Favorable Zacks Rank
The promising estimate revisions have helped Ultra Clean earn a Zacks Rank #1 (Strong 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
Ultra Clean shares have added 15.5% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.
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Ultra Clean Holdings, Inc. (UCTT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).