Earnings Estimates Moving Higher for Tree.com (TREE): Time to Buy?

Tree.com (TREE) 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.

Analysts' growing optimism on the earnings prospects of this mortgage lending service provider is driving estimates higher, 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. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

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 Tree.com, 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.

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 $1.23 per share for the current quarter represents a change of +53.8% from the number reported a year ago.

The Zacks Consensus Estimate for Tree.com has increased 36.76% over the last 30 days, as three estimates have gone higher while one has gone lower.

Current-Year Estimate Revisions

The company is expected to earn $4.37 per share for the full year, which represents a change of +37.0% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, three estimates have moved up for Tree.com versus one negative revision. This has pushed the consensus estimate 28.59% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Tree.com 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

While strong estimate revisions for Tree.com have attracted decent investments and pushed the stock 33% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research