RCM Technologies, Inc. (RCMT) Is a Trending Stock: Facts to Know Before Betting on It

RCM Technologies, Inc. (RCMT) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.Over the past month, shares of this company have returned +3.3%, compared to the Zacks S&P 500 composite's +3.8% change. During this period, the Zacks Staffing Firms industry, which RCM Technologies falls in, has gained 6%. The key question now is: What could be the stock's future direction?Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.Revisions to Earnings EstimatesRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.For the current quarter, RCM Technologies is expected to post earnings of $0.82 per share, indicating a change of +15.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.7% over the last 30 days.For the current fiscal year, the consensus earnings estimate of $2.36 points to a change of +11.9% from the prior year. Over the last 30 days, this estimate has changed +0.5%.For the next fiscal year, the consensus earnings estimate of $2.84 indicates a change of +20.3% from what RCM Technologies is expected to report a year ago. Over the past month, the estimate has changed +1.4%.With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for RCM Technologies.The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSRevenue Growth ForecastEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.For RCM Technologies, the consensus sales estimate for the current quarter of $77.19 million indicates a year-over-year change of +8.7%. For the current and next fiscal years, $278.65 million and $308.3 million estimates indicate +5.9% and +10.6% changes, respectively.Last Reported Results and Surprise HistoryRCM Technologies reported revenues of $60.37 million in the last reported quarter, representing a year-over-year change of +4%. EPS of $0.44 for the same period compares with $0.46 a year ago.Compared to the Zacks Consensus Estimate of $60.59 million, the reported revenues represent a surprise of -0.37%. The EPS surprise was 0%.Over the last four quarters, RCM Technologies surpassed consensus EPS estimates two times. The company could not beat consensus revenue estimates in any of the last four quarters.ValuationNo investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.RCM Technologies is graded A on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.Bottom LineThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about RCM Technologies. However, its Zacks Rank #2 does suggest that it may outperform the broader market in the near term.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report RCM Technologies, Inc. (RCMT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks