Why Dropbox (DBX) Outpaced the Stock Market Today

In the latest close session, Dropbox (DBX) was up +1.5% at $23.75. The stock exceeded the S&P 500, which registered a gain of 0.44% for the day. Meanwhile, the Dow gained 0.36%, and the Nasdaq, a tech-heavy index, added 0.54%.

The online file-sharing company's stock has dropped by 12.65% in the past month, falling short of the Computer and Technology sector's loss of 2.47% and the S&P 500's loss of 3.31%.

The investment community will be closely monitoring the performance of Dropbox in its forthcoming earnings report. The company is expected to report EPS of $0.71, up 1.43% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $619.51 million, down 0.83% from the year-ago period.

For the full year, the Zacks Consensus Estimates project earnings of $3.05 per share and a revenue of $2.49 billion, demonstrating changes of +7.39% and -1.13%, respectively, from the preceding year.

It's also important for investors to be aware of any recent modifications to analyst estimates for Dropbox. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the past month, there's been no change in the Zacks Consensus EPS estimate. Dropbox is currently sporting a Zacks Rank of #3 (Hold).

Investors should also note Dropbox's current valuation metrics, including its Forward P/E ratio of 7.67. This expresses a discount compared to the average Forward P/E of 13.98 of its industry.

Meanwhile, DBX's PEG ratio is currently 1.1. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. By the end of yesterday's trading, the Internet - Services industry had an average PEG ratio of 1.86.

The Internet - Services industry is part of the Computer and Technology sector. This industry, currently bearing a Zacks Industry Rank of 171, finds itself in the bottom 30% echelons of all 250+ industries.

The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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Dropbox, Inc. (DBX): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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