ASML Holding N.V. (ASML) Is a Trending Stock: Facts to Know Before Betting on It

ASML (ASML) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.Over the past month, shares of this equipment supplier to semiconductor makers have returned +18.2%, compared to the Zacks S&P 500 composite's +5.4% change. During this period, the Zacks Semiconductor Equipment - Wafer Fabrication industry, which ASML falls in, has gained 18.5%. 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.Earnings Estimate RevisionsRather 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, ASML is expected to post earnings of $8.10 per share, indicating a change of +78% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.For the current fiscal year, the consensus earnings estimate of $37.1 points to a change of +32.7% 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 $48.06 indicates a change of +29.5% from what ASML is expected to report a year ago. Over the past month, the estimate has changed +1.5%.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 ASML.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.For ASML, the consensus sales estimate for the current quarter of $10.37 billion indicates a year-over-year change of +18.8%. For the current and next fiscal years, $45.72 billion and $54.88 billion estimates indicate +23.7% and +20% changes, respectively.Last Reported Results and Surprise HistoryASML reported revenues of $10.26 billion in the last reported quarter, representing a year-over-year change of +26%. EPS of $8.37 for the same period compares with $6.31 a year ago.Compared to the Zacks Consensus Estimate of $10.21 billion, the reported revenues represent a surprise of +0.48%. The EPS surprise was +8.42%.Over the last four quarters, ASML surpassed consensus EPS estimates two times. The company topped consensus revenue estimates three times 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.Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.ASML is graded F on this front, indicating that it is trading at a premium 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 ASML. However, its Zacks Rank #2 does suggest that it may outperform 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 +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks