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Will Monday.com (MNDY) Gain on Rising Earnings Estimates?

Zacks Equity Research
·2-min read

Monday.com (MNDY) 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 rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this project management software developer, 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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

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.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for Monday.com, as there has been strong agreement among the covering analysts in raising estimates.

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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 earnings estimate of $0.14 per share for the current quarter represents a change of +142.42% from the number reported a year ago.

Over the last 30 days, five estimates have moved higher for Monday.com compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 43.72%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $0.58 per share, representing a year-over-year change of +179.45%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, six estimates have moved up for Monday.com versus no negative revisions. This has pushed the consensus estimate 42.34% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Monday.com 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

Monday.com shares have added 37.1% 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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Zacks Investment Research