Investors may consider placing their bets on Credo Technology Group Holding Ltd. (CRDO) since it has recently been elevated to a Zacks Rank #2 (Buy). This change largely stems from increasing earnings forecasts — which are among the strongest elements influencing share values.
The Zacks rating is based exclusively on shifts in a company’s earnings outlook. It monitors EPS forecasts for both the present year and upcoming year as provided by financial analysts who cover the stock, aggregating these into what’s known as the Zacks Consensus Estimate.
Many individual investors struggle with making choices influenced by rating upgrades from Wall Street analysts, as such adjustments frequently stem from subjective elements that can be challenging to observe and quantify instantly. Under these circumstances, the Zacks rating system proves valuable due to the impact of evolving profit forecasts on predicting short-term fluctuations in stock prices.
As such, the Zacks rating upgrade for Credo Technology Group is essentially a positive comment on its earnings outlook that could have a favorable impact on its stock price.
A company’s prospective earning capabilities, as indicated through adjustments in profit forecasts, show a robust correlation with short-term fluctuations in its share prices. This connection can largely be attributed to the impact of institutional investors who rely on actual profits and projected figures to determine the intrinsic worth of stocks. When these estimations are revised upward or downward within their assessment frameworks, they result in elevated or reduced valuations for the securities, prompting institutions to generally purchase or divest them accordingly. Subsequently, such significant trading activities instigate changes in the stock’s market pricing.
Essentially, increasing earnings forecasts along with subsequent upgrades of ratings for Credo Technology Group suggest positive developments within the company’s core operations. This upward trajectory in fundamentals warrants investor recognition through boosting the stock price.
Leveraging the Strength of Adjusted Profit Forecasts
Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, so it could be truly rewarding if such revisions are tracked for making an investment decision. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.
The Zacks Rank stock-ranking system categorizes stocks into five levels based on four criteria linked to earnings forecasts, moving from Zacks Rank #1 (Strong Buy) down to Zacks Rank #5 (Strong Sell). This ranking method boasts a commendable performance history verified by external audits; historically, Zacks Rank #1 stocks have provided an average yearly return of +25% starting from 1988. To view all the current Zacks #1 Rank (Strong Buy) equities for today, click here >>>>.
Earnings Forecast Updates for Credo Technology Group
For the fiscal year ending April 2025, this company is expected to earn $0.63 per share, which is a change of 600% from the year-ago reported number.
Analysts have been steadily raising their estimates for Credo Technology Group. Over the past three months, the Zacks Consensus Estimate for the company has increased 34.8%.
Bottom Line
Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of ‘buy’ and ‘sell’ ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a ‘Strong Buy’ rating and the next 15% get a ‘Buy’ rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.
You can learn more about the Zacks Rank here >>>
The upgrade of Credo Technology Group to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.
This article originally published on Zacks Investment Research (Dailyexe).
