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QAD (QADA) Hits Fresh High: Is There Still Room to Run?

Shares of QAD (QADA) have been strong performers lately, with the stock up 22.9% over the past month. The stock hit a new 52-week high of $79.48 in the previous session. QAD has gained 24.3% since the start of the year compared to the 16.6% move for the Zacks Computer and Technology sector and the 8.6% return for the Zacks Business - Software Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 26, 2021, QAD reported EPS of $0.27 versus consensus estimate of $0.12 while it beat the consensus revenue estimate by 6.22%.

For the current fiscal year, QAD is expected to post earnings of $1.28 per share on $336.09 million in revenues. This represents an 8.47% change in EPS on a 9.17% change in revenues. For the next fiscal year, the company is expected to earn $1.38 per share on $366.22 million in revenues. This represents a year-over-year change of 7.81% and 8.96%, respectively.

Valuation Metrics

QAD may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

QAD has a Value Score of F. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 61.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 56.4X versus its peer group's average of 25.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, QAD currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if QAD fits the bill. Thus, it seems as though QAD shares could still be poised for more gains ahead.

How Does QAD Stack Up to the Competition?

Shares of QAD have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including United Internet (UDIRF), CGI Group (GIB), and Alphabet (GOOGL), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 41% of all the industries we have in our universe, so it looks like there are some nice tailwinds for QAD, even beyond its own solid fundamental situation.


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