Get to know the trends ahead of next week’s premiere

The market is expecting HTG Molecular Diagnostics, Inc. (HTGM) to deliver year-over-year earnings growth on higher revenue when it reports results for the quarter ended September 2019. This widely known consensus forecast is important when assessing the company’s earnings picture, but a strong factor that could impact its stock price in the near term is how well actual results compare to those estimates.

The stock price could rise if these key numbers beat expectations in the upcoming earnings report, which is due on November 12. On the other hand, if they do not meet expectations, the share price may decline.

While the sustainability of the immediate price movement and future earnings expectations will largely depend on management’s discussion of business conditions during the earnings call, it is worth limiting the likelihood of a positive EPS surprise.

Zacks Consensus Estimate

The company is expected to report quarterly loss of $0.14 per share in its upcoming report, representing a year-over-year change of 17.7%.

Revenue is expected to be $5.63 million, up 19.5% from the same quarter last year.

Estimate revision trend

The consensus EPS estimate for the quarter remained unchanged over the past 30 days. This is essentially a reflection of how the analysts covering the aggregate have reassessed their initial estimates during that period.

Investors should note that the direction of each analyst’s estimate revisions will not always be reflected in the aggregate change.

Price, Consensus and EPS Surprise

Whisper about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. This insight is the basis of our proprietary surprise forecasting model, the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is the newer version of the Zacks Consensus EPS Estimate. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously predicted.

Thus, a positive or negative Earnings ESP reading theoretically indicates a likely deviation of actual earnings from consensus estimates. However, the predictive power of the model is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when paired with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks in this combination deliver a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of its Earnings ESP.

It’s important to remember that a negative Earnings ESP reading doesn’t necessarily mean earnings are lost. Our research shows that it’s difficult to predict earnings growth with any degree of confidence for stocks with negative Earnings ESP readings and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How the numbers stacked up for HTG Molecular Diagnostics, Inc.

In the case of HTG Molecular Diagnostics, Inc. The Most Accurate Estimate is the same as the Zacks Consensus Estimate, which suggests that there is no recent analyst view that differs from what is considered the basis for the consensus estimate. This resulted in an earnings ESP of 0%.

On the other hand, the company’s stock currently has a Zacks Rank of #3.

Therefore, this combination makes it difficult to clearly predict that HTG Molecular Diagnostics, Inc. will exceed consensus EPS estimates.

Can history give any clues about financial performance?

When calculating future earnings estimates, analysts often consider how well a company has been able to match consensus estimates in the past. So it’s worth taking a look at the surprise history to assess its impact on the upcoming number.

For the last quarter, it was expected that HTG Molecular Diagnostics, Inc. would post a loss of $0.15 per share when it actually produced a loss of $0.17, delivering a surprise of -13.33%.

The company has beaten consensus earnings per share estimates twice over the last four quarters.

Bottom Line

Beating or missing earnings may not be the only basis for a stock rising or falling. Many stocks lose ground despite beating gains due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks that are expected to beat earnings expectations increases your chances of success. That’s why it’s worth checking a company’s earnings ranking and Zacks Rank ahead of their quarterly release. Use our Earnings ESP filter to find the best stocks to buy or sell before they’re reported.

HTG Molecular Diagnostics, Inc. It doesn’t seem like a compelling candidate to beat earnings. However, investors should also pay attention to other factors if they want to bet on or stay away from these stocks ahead of an earnings release.

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