Surging Earnings Estimates Signal Upside for Afya (AFYA) Stock

Investors might want to bet on Afya (AFYA), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this medical education company, 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 Afya, 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.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $0.54 per share for the current quarter represents a change of -1.8% from the number reported a year ago.

Over the last 30 days, the Zacks Consensus Estimate for Afya has increased 8.16% because one estimate has moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $1.79 per share represents a change of +2.3% from the year-ago number.

The revisions trend for the current year also appears quite promising for Afya, 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 8.44%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Afya 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

Afya shares have added 6% 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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This article originally published on Zacks Investment Research (zacks.com).

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