Does TransAct Technologies Incorporated (TACT) Have the Potential to Rally 146% as Wall Street Analysts Expect? – Yahoo Finance
Shares of TransAct Technologies Incorporated (TACT) have gained 35.2% over the past four weeks to close the last trading session at $5.68, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $14 indicates a potential upside of 146.5%.
The mean estimate comprises three short-term price targets with a standard deviation of $5.29. While the lowest estimate of $10 indicates a 76.1% increase from the current price level, the most optimistic analyst expects the stock to surge 252.1% to reach $20. It’s very important to note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.
While the consensus price target is a much-coveted metric for investors, solely banking on this metric to make an investment decision may not be wise at all. That’s because the ability and unbiasedness of analysts in setting price targets have long been questionable.
However, an impressive consensus price target is not the only factor that indicates a potential upside in TACT. This view is strengthened by the agreement among analysts that the company will report better earnings than what they estimated earlier. Though a positive trend in earnings estimate revisions doesn’t give any idea as to how much the stock could surge, it has proven effective in predicting an upside.
Price, Consensus and EPS Surprise
Here’s What You Should Know About Analysts’ Price Targets
According to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.
While Wall Street analysts have deep knowledge of a company’s fundamentals and the sensitivity of its business to economic and industry issues, many of them tend to set overly optimistic price targets. Are you wondering why?
They usually do that to drum up interest in shares of companies that their firms either have existing business relationships with or are looking to be associated with. In other words, business incentives of firms covering a stock often result in inflated price targets set by analysts.
However, a tight clustering of price targets, which is represented by a low standard deviation, indicates that analysts have a high degree of agreement about the direction and magnitude of a stock’s price movement. While that doesn’t necessarily mean the stock will hit the average price target, it could be a good starting point for further research aimed at identifying the potential fundamental driving forces.
That said, while investors should not entirely ignore price targets, making an investment decision solely based on them could lead to disappointing ROI. So, price targets should always be treated with a high degree of skepticism.
Here’s Why There Could be Plenty of Upside Left in TACT
Analysts’ growing optimism over the company’s earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher, could be a legitimate reason to expect an upside in the stock. That’s because empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The Zacks Consensus Estimate for the current year has increased 50.4% over the past month, as one estimate has gone higher compared to no negative revision.
Moreover, TACT currently has a Zacks Rank #1 (Strong Buy), which means it is in the top 5% of more than the 4,000 stocks that we rank based on four factors related to earnings estimates. Given an impressive externally-audited track record, this is a more conclusive indication of the stock’s potential upside in the near term. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>
Therefore, while the consensus price target may not be a reliable indicator of how much TACT could gain, the direction of price movement it implies does appear to be a good guide.
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
TransAct Technologies Incorporated (TACT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Related Quotes
The consensus price target hints at a 38.5% upside potential for Hilton Grand Vacations (HGV). While empirical research shows that this sought-after metric is hardly effective, an upward trend in earnings estimate revisions could mean that the stock will witness an upside in the near term.
The consensus price target hints at a 97.4% upside potential for GoodRx Holdings, Inc. (GDRX). While empirical research shows that this sought-after metric is hardly effective, an upward trend in earnings estimate revisions could mean that the stock will witness an upside in the near term.
The average of price targets set by Wall Street analysts indicates a potential upside of 113% in Health Catalyst (HCAT). While the effectiveness of this highly sought-after metric is questionable, the positive trend in earnings estimate revisions might translate into an upside in the stock.
The mean of analysts' price targets for NGM Biopharmaceuticals (NGM) points to a 461.7% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.
Motley Fool contributor Jeremy Bowman talks with GitLab CFO Brian Robins about how his company is helping other companies develop software, and the trade-off between growth and profitability. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. Chris Hill: You ever have one of those days when every traffic light you hit is green?
Warner Music Group Corp. (WMG) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
The mean of analysts' price targets for BioAtla, Inc. (BCAB) points to a 259.6% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.
The mean of analysts' price targets for Verona Pharma PLC American Depositary Share (VRNA) points to a 109.5% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.
Burlington Stores (BURL) possesses the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
NWPX, IBA and FLEX made it to the Zacks Rank #1 (Strong Buy) momentum stocks list on November 15, 2022.
The mean of analysts' price targets for Bumble Inc. (BMBL) points to a 45.6% upside in the stock. While this highly sought-after metric has not proven reasonably effective, strong agreement among analysts in raising earnings estimates does indicate an upside in the stock.
Virtual delivery of education and prudent cost-saving initiatives are likely to open up opportunities for PWSC, LOPE and PRDO. Fed's hawkish moves and higher costs are risks for the Zacks Schools industry.
Now that COVID-induced demand has subsided, Wayfair’s business has resumed burning cash, according to New Constructs.
How can you spot the best stocks to watch — and weed out the laggards? Start by checking IBD's exclusive Relative Strength (RS) Rating. This telltale metric can help you spot the best stocks to buy and watch in the early stages of a big move.
The firm of Donald Trump's one-time communications director was bailed out by Sam Bankman-Fried.
Potential Transocean Ltd. ( NYSE:RIG ) shareholders may wish to note that the Independent Chairman of the Board…
Regardless of whether you're new to investing or have experienced your fair share of bear market declines, this has proved to be an exceptionally challenging year. Each of the three major U.S. stock indexes has eventually recouped their losses following sizable declines; and I have little doubt the same will prove true of the current bear market downturn at some point in the future. The first genius stock you can buy with just $20 is telecom company AT&T (NYSE: T).
Are these a couple of rare opportunities that investors shouldn't pass up, or are the price drops valid because of significant concerns that should keep you away from these companies? Takeda is a Japan-based healthcare company that makes vaccines and pharmaceutical products.
The super investor is sounding the alarm.
Today's Research Daily features new research reports on 16 major stocks, including Pfizer Inc. (PFE), The Goldman Sachs Group, Inc. (GS) and General Electric Company (GE).