Bay Commercial Bank (BCML) Switches to Strong Buy: Rationale for the Upgrade

Bay Commercial Bank (BCML) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). This rating change essentially reflects an upward trend in earnings estimates – one of the most powerful forces impacting stock prices.

The Zacks rating is based solely on the evolution of a company’s earnings. It tracks EPS estimates for the current year and beyond from sell-side analysts covering the stock through a consensus metric – the Zacks Consensus Estimate.

Individual investors often find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are primarily driven by subjective factors that are difficult to see and measure in real time. In these situations, the Zacks rating system is useful because of the power of a changing earnings picture to determine short-term stock price movements.

Therefore, Zacks’ rating upgrade for Bay Commercial Bank essentially reflects positivity about its earnings outlook, which could translate into buying pressure and an increase in its share price.

The most powerful force impacting stock prices

Changes in a company’s future earnings potential, as reflected in earnings estimate revisions, and short-term changes in its stock prices have been found to be highly correlated. This is partly because of the influence of institutional investors who use earnings and earnings estimates to calculate the fair value of a company’s stock. An increase or decrease in earnings estimates in their valuation models simply translates to a higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of stock then results in a price movement for the stock.

For Bay Commercial Bank, the rise in earnings estimates and the resulting rating upgrade fundamentally means an improvement in the company’s underlying business. And investors’ appreciation of this improving trading trend should push the stock higher.

Harnessing the Power of Earnings Estimate Revisions

Empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock movements, so it could be really rewarding if these revisions are followed when making an investment decision. This is where the proven Zacks Rank stock rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock rating system, which uses four factors tied to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive track record. externally audited record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>.

Earnings estimate revisions for Bay Commercial Bank

For the fiscal year ending December 2022, this company is expected to earn $2.34 per share, which is a change of 23.2% from the figure reported a year ago.

Analysts have steadily raised their estimates for Bay Commercial Bank. Over the past three months, Zacks’ consensus estimate for the company has risen 23.2%.

Conclusion

Unlike overly optimistic Wall Street analysts whose rating systems tend to favor favorable recommendations, the Zacks rating system maintains an equal proportion of “buy” and “sell” ratings for its entire universe of over 4 000 shares at any time. Regardless of market conditions, only the 5% of stocks covered by Zacks earn a “Strong Buy” rating and the next 15% earn a “Buy” rating. Thus, placing a stock in the top 20% of stocks covered by Zacks indicates its superior earnings estimate revision function, making it a strong candidate for delivering above-market returns in the short term.

you can learn read more about the Zacks ranking here >>>

Bay Commercial Bank’s upgrade to Zacks No. 1 rank positions it in the top 5% of stocks covered by Zacks in terms of estimate revisions, implying that the stock could rise in the near term.

Zacks names ‘only one best choice for doubling up’

From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.

It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.

This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.

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