Why Cloudflare (NET) Outpaced the Stock Market Today

Cloudflare (NET) closed the most recent trading day at $216.29, moving +2.13% from the previous trading session. The stock exceeded the S&P 500, which registered a gain of 0.08% for the day. At the same time, the Dow lost 0.18%, and the tech-heavy Nasdaq gained 0.1%.

The stock of web security and content delivery company has risen by 5.11% in the past month, leading the Computer and Technology sector's loss of 2.82% and the S&P 500's loss of 1.74%.

The investment community will be closely monitoring the performance of Cloudflare in its forthcoming earnings report. In that report, analysts expect Cloudflare to post earnings of $0.23 per share. This would mark year-over-year growth of 43.75%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $621.91 million, up 29.81% from the year-ago period.

Looking at the full year, the Zacks Consensus Estimates suggest analysts are expecting earnings of $1.1 per share and revenue of $2.8 billion. These totals would mark changes of +18.28% and +29.25%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for Cloudflare. These revisions help to show the ever-changing nature of near-term business trends. Therefore, positive revisions in estimates convey analysts' confidence in the business performance and profit potential.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Over the last 30 days, the Zacks Consensus EPS estimate has remained unchanged. At present, Cloudflare boasts a Zacks Rank of #3 (Hold).

Investors should also note Cloudflare's current valuation metrics, including its Forward P/E ratio of 191.86. This indicates a premium in contrast to its industry's Forward P/E of 19.31.

We can also see that NET currently has a PEG ratio of 7.15. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. The Internet - Software industry had an average PEG ratio of 1.07 as trading concluded yesterday.

The Internet - Software industry is part of the Computer and Technology sector. With its current Zacks Industry Rank of 146, this industry ranks in the bottom 41% of all industries, numbering over 250.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.

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

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