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Earnings Estimates Moving Higher for Zscaler (ZS): Time to Buy?

Zacks Equity Research
·2-min read

Zscaler (ZS) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The upward trend in estimate revisions for this cloud-based information security provider 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 Zscaler, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

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

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.69 per share for the current quarter, which represents a year-over-year change of +7.81%.

The Zacks Consensus Estimate for Zscaler has increased 40.58% over the last 30 days, as 11 estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $2.99 per share represents a change of +67.04% from the year-ago number.

The revisions trend for the current year also appears quite promising for Zscaler, with 13 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 57.01%.

Favorable Zacks Rank

Thanks to promising estimate revisions, Zscaler currently carries a Zacks Rank #1 (Strong 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

Zscaler shares have added 11.2% 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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Zscaler, Inc. (ZS) : Free Stock Analysis Report

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Zacks Investment Research