Is Trending Stock ClevelandCliffs Inc. (CLF) a Buy Now?
Zacks Equity Research
Fri, May 20, 2022, 9:00 AM·5 min read
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CLF
+0.78%
Cleveland-Cliffs (CLF) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.
Over the past month, shares of this mining company have returned -27%, compared to the Zacks S&P 500 composite's -12.5% change. During this period, the Zacks Mining - Miscellaneous industry, which Cleveland-Cliffs falls in, has lost 17%. The key question now is: What could be the stock's future direction?
While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.
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Revisions to Earnings Estimates
Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Cleveland-Cliffs is expected to post earnings of $1.54 per share for the current quarter, representing a year-over-year change of +5.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.8%.
For the current fiscal year, the consensus earnings estimate of $5.89 points to a change of +0.3% from the prior year. Over the last 30 days, this estimate has changed +13.4%.
For the next fiscal year, the consensus earnings estimate of $4.95 indicates a change of -15.9% from what Cleveland-Cliffs is expected to report a year ago. Over the past month, the estimate has changed +153.7%.
With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #1 (Strong Buy) for Cleveland-Cliffs.
The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:
12 Month EPS
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12-month consensus EPS estimate for CLF _12MonthEPSChartUrl
Revenue Growth Forecast
Even though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.
In the case of Cleveland-Cliffs, the consensus sales estimate of $5.88 billion for the current quarter points to a year-over-year change of +16.5%. The $23.49 billion and $20.88 billion estimates for the current and next fiscal years indicate changes of +14.9% and -11.1%,
