Can NetScout (NTCT) run higher on rising earnings estimates?

NetScout Systems (NTCT - Free Report) 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.

The upward trend in estimate revisions for this provider of products that gauge network performance reflects growing optimism of analysts on its earnings prospects, 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. 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 NetScout Systems, 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

For the current quarter, the company is expected to earn $0.39 per share, which is a change of +14.7% from the year-ago reported number.

Over the last 30 days, the Zacks Consensus Estimate for NetScout has increased 24.24% because one estimate has moved higher while one has gone lower.

Current-year estimate revisions

The company is expected to earn $2.71 per share for the full year, which represents a change of +9.3% from the prior-year number.

The revisions trend for the current year also appears quite promising for NetScout, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 12.3%.

Favorable zacks rank

Thanks to promising estimate revisions, NetScout 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.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom line

While strong estimate revisions for NetScout have attracted decent investments and pushed the stock 23.3% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.