Warner Bros. Discovery, Inc. (WBD) Is a Trending Stock: Facts to Know Before Betting on It

Warner Bros. Discovery (WBD) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.Shares of this operator of cable TV channels such as TLC and Animal Planet have returned +33.9% over the past month versus the Zacks S&P 500 composite's +3.8% change. The Zacks Broadcast Radio and Television industry, to which Warner Bros. Discovery belongs, has gained 13.7% over this period. Now the key question is: Where could the stock be headed in the near term?While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.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.We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.For the current quarter, Warner Bros. Discovery is expected to post earnings of $0.07 per share, indicating a change of +143.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +70% over the last 30 days.The consensus earnings estimate of -$4.37 for the current fiscal year indicates a year-over-year change of -241.4%. This estimate has changed +2.9% over the last 30 days.For the next fiscal year, the consensus earnings estimate of $0.09 indicates a change of +102% from what Warner Bros. Discovery is expected to report a year ago. Over the past month, the estimate has changed +12.5%.Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Warner Bros. Discovery is rated Zacks Rank #3 (Hold).The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:12 Month EPSProjected Revenue GrowthEven 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.In the case of Warner Bros. Discovery, the consensus sales estimate of $10.52 billion for the current quarter points to a year-over-year change of +2.3%. The $39.76 billion and $40.49 billion estimates for the current and next fiscal years indicate changes of -3.8% and +1.9%, respectively.Last Reported Results and Surprise HistoryWarner Bros. Discovery reported revenues of $9.62 billion in the last reported quarter, representing a year-over-year change of -3.6%. EPS of $0.05 for the same period compares with -$0.17 a year ago.Compared to the Zacks Consensus Estimate of $9.9 billion, the reported revenues represent a surprise of -2.77%. The EPS surprise was +171.43%.Over the last four quarters, the company surpassed EPS estimates just once. The company topped consensus revenue estimates just once over this period.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.Warner Bros. Discovery is graded B 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.ConclusionThe 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 Warner Bros. Discovery. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Warner Bros. Discovery, Inc. (WBD): 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