The ONE Group Hospitality (STKS) Upgraded to Strong Buy: Whats Behind the Upgrade?

The ONE Group Hospitality, Inc. (STKS) has recently been upgraded to a Zacks Rank #1 (Strong Buy), making it a prime candidate for inclusion in your investment portfolio. This upgrade is a reflection of an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.

The Zacks rating system is based solely on a company's changing earnings picture. The system tracks the Zacks Consensus Estimate, which is the consensus of EPS estimates from sell-side analysts covering the stock for the current and following years.

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Since a changing earnings picture is a powerful factor influencing near-term stock price movements, the Zacks rating system is invaluable for individual investors. It can be difficult for investors to make decisions based on rating upgrades by Wall Street analysts, which are often driven by subjective factors that are hard to see and measure in real-time.

The Zacks rating upgrade for The ONE Group Hospitality reflects positivity about its earnings outlook, which could translate into buying pressure and an increase in its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company's future earnings potential, as reflected in earnings estimate revisions, has been strongly correlated with the near-term price movement of its stock. The influence of institutional investors partially contributes to this relationship, as these large professionals use earnings and earnings estimates to calculate the fair value of a company's shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their bulk investment action then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for The ONE Group Hospitality imply an improvement in the company's underlying business. Investors should show their appreciation for this improving business trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements. Therefore, tracking such revisions can be truly rewarding when making an investment decision. This is where the tried-and-tested Zacks Rank stock-rating system plays an important role, effectively harnessing the power of earnings estimate revisions.

The Zacks Rank stock-rating system uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). The system has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988.

Earnings Estimate Revisions for The ONE Group Hospitality

This company is expected to earn $0.51 per share for the fiscal year ending December 2025, which represents no year-over-year change. Analysts have been steadily raising their estimates for The ONE Group Hospitality. Over the past three months, the Zacks Consensus Estimate for the company has increased by 184.9%.

Bottom Line

Unlike Wall Street analysts whose rating systems tend to be overly optimistic, the Zacks rating system maintains an equal proportion of "buy" and "sell" ratings for its entire universe of more than 4,000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a "Strong Buy" rating and the next 15% get a "Buy" rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

The upgrade of The ONE Group Hospitality to a Zacks Rank #1 positions it in the top 5% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

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The ONE Group Hospitality, Inc. (STKS) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).