Earnings Estimates Moving Higher for Runway Growth Finance Corp. (RWAY): Time to Buy?

Runway Growth Finance Corp. (RWAY) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The upward trend in estimate revisions for this company reflects growing optimism of analysts on its earnings prospects, 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 -- 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.

For Runway Growth Finance Corp. There has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher 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 $0.40 per share for the current quarter represents a change of +8.11% from the number reported a year ago.

Over the last 30 days, the Zacks Consensus Estimate for Runway Growth Finance Corp. has increased 9.17% because three estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $1.58 per share, representing a year-over-year change of -3.66%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, four estimates have moved up for Runway Growth Finance Corp. versus no negative revisions. This has pushed the consensus estimate 7.04% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Runway Growth Finance Corp. 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

Runway Growth Finance Corp. shares have added 6.2% 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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This article originally published on Zacks Investment Research (zacks.com).

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