Advertisement
Singapore markets closed
  • Straits Times Index

    3,173.55
    +1.62 (+0.05%)
     
  • S&P 500

    5,149.42
    +32.33 (+0.63%)
     
  • Dow

    38,790.43
    +75.63 (+0.20%)
     
  • Nasdaq

    16,103.45
    +130.25 (+0.82%)
     
  • Bitcoin USD

    63,112.04
    -4,893.54 (-7.20%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,718.49
    -4.06 (-0.05%)
     
  • Gold

    2,158.20
    -6.10 (-0.28%)
     
  • Crude Oil

    82.45
    -0.27 (-0.33%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Nikkei

    40,003.60
    +263.20 (+0.66%)
     
  • Hang Seng

    16,529.48
    -207.62 (-1.24%)
     
  • FTSE Bursa Malaysia

    1,544.96
    -8.68 (-0.56%)
     
  • Jakarta Composite Index

    7,336.75
    +34.30 (+0.47%)
     
  • PSE Index

    6,848.43
    -4.86 (-0.07%)
     

Here is What to Know Beyond Why Realty Income Corporation (O) is a Trending Stock

Realty Income Corp. (O) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Shares of this real estate investment trust have returned +5.1% over the past month versus the Zacks S&P 500 composite's +7.4% change. The Zacks REIT and Equity Trust - Retail industry, to which Realty Income Corp. belongs, has gained 9.5% over this period. Now the key question is: Where could the stock be headed in the near term?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

ADVERTISEMENT

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Realty Income Corp. is expected to post earnings of $0.99 per share, indicating a change of +5.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

The consensus earnings estimate of $3.96 for the current fiscal year indicates a year-over-year change of +10.3%. This estimate has changed -0.3% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $4.06 indicates a change of +2.7% from what Realty Income Corp. is expected to report a year ago. Over the past month, the estimate has changed -0.3%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Realty Income Corp. is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

12-month consensus EPS estimate for O _12MonthEPSChartUrl
12-month consensus EPS estimate for O _12MonthEPSChartUrl

Revenue Growth Forecast

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For Realty Income Corp. the consensus sales estimate for the current quarter of $853.29 million indicates a year-over-year change of +24.6%. For the current and next fiscal years, $3.3 billion and $3.61 billion estimates indicate +58.5% and +9.3% changes, respectively.

Last Reported Results and Surprise History

Realty Income Corp. reported revenues of $837.27 million in the last reported quarter, representing a year-over-year change of +70.2%. EPS of $0.35 for the same period compares with $0.91 a year ago.

Compared to the Zacks Consensus Estimate of $828.53 million, the reported revenues represent a surprise of +1.06%. The EPS surprise was +2.08%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates each time over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Realty Income Corp. is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Conclusion

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Realty Income Corp. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Realty Income Corporation (O) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research