Here’s everything you need to know about COMPASS PLC Sponsored ADR(CMPS) Rating Upgrade: Strong Buy

Investors might consider COMPASS Pathways PLC Sponsored ADR/CMPS, which has recently been upgraded to a Zacks Rank 1, or Strong Buy. This rating change has been triggered by an upward trend of earnings estimates — one the most powerful factors that impact stock prices.

Changes in earnings are the only determinant of a company’s Zacks Rating. The Zacks Consensus estimate is the consensus of EPS estimates by sell-side analysts for the stock. It is used to track the stock’s current and future earnings.

Individual investors find the Zacks rating system extremely useful as it allows them to see a changing earnings picture and determine stock price movements in the near future. This is because it can be hard to make decisions based only on Wall Street analysts’ rating upgrades. These movements are largely driven by subjective factors, which are difficult to measure and see in real-time.

The Zacks rating upgrade to COMPASS Pathways PLC Sponsored ADR reflects a positive outlook on its earnings outlook which could translate into buying and selling pressure as well as an increase in its stock prices.

Stock prices affected by the most powerful force

The near-term stock price movement has been shown to strongly correlate with changes in a company’s future earnings potential as indicated by earnings estimate revisions. Institutional investors use earnings and earnings estimates to calculate the fair value of company shares. Institutional investors often buy or sell stock whose fair value is affected by changes in the earnings estimates used in their valuation models. This results in price movement for the stock due to their bulk investment actions.

For COMPASS Pathways PLC Sponsored ADR a rise in earnings estimates and a consequent rating upgrade means a significant improvement in the company’s underlying businesses. This improving trend in the business should be appreciated by investors and push the stock higher.

The Power of Earnings: Estimate Revisions

Empirical research has demonstrated a strong correlation in earnings estimate revision trends and near-term stock movement trends. Tracking such revisions to make an investment decision can be extremely rewarding. The tried-and-true Zacks Rank stock ranking system is a great tool for tracking earnings estimate revisions and making investment decisions.

Zacks Rank’s stock-rating system, which relies on four factors related earnings estimates to group stocks into five categories, ranging Zacks Rank #1 (Strong buy) to Zacks Rank #4 (Strong sell), has a strong externally-audited track-record, with Zacks Rank #1 stocks generating an annual average return of +25% every year since 1988. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>.

Earnings Estimates Revisions for Sponsored ADR COMPASS Pathways PLC

This company is forecast to earn -$2.04 a share for the fiscal year ending in December 2022. This is an increase of -14% over the reported number the year before.

Analysts have been increasing their estimates for COMPASS Pathways PLC Sponsored ADR. The Zacks Consensus Estimate has increased 7.6% over the last three months.

Bottom line

Contrary to Wall Street analysts who tend to give more weight to favorable recommendations than the Zacks rating, which maintains an equal number of ‘buy’ and’sell ratings for all its stocks, over 4000 at any given time, the Zacks system has a similar ratio of ‘buy-‘ and’sell-‘ ratings. Market conditions aside, the Zacks rating system gives a strong buy rating to the top 5% and a strong buy rating to the remaining 15%. A stock’s placement in the top 20 percent of Zacks-covered shares indicates that it has a superior earnings estimate revision capability, which makes it a solid candidate to produce market-beating returns in near term.

You can learn more about the Zacks Rank here >>>

The Zacks Rank #1 upgrade of COMPASS Passways PLC Sponsored ADR positions it in top 5% of Zacks covered stocks in terms estimate revisions. It suggests that the stock may move higher in coming months.

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