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Have you been paying attention to shares of Twilio (TWLO)? Shares have been on the move with the stock up 28% over the past month. The stock hit a new 52-week high of $142.31 in the previous session. Twilio has gained 28.6% since the start of the year compared to the 30.3% move for the Zacks Computer and Technology sector and the 44.6% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 30, 2024, Twilio reported EPS of $1.02 versus consensus estimate of $0.87.
For the current fiscal year, Twilio is expected to post earnings of $4.24 per share on $4.43 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $4.74 per share on $4.76 billion in revenues. This represents a year-over-year change of 15.27% and 7.51%, respectively.
Valuation Metrics
Twilio may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Twilio has a Value Score of F. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 32.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 31.2X. On a trailing cash flow basis, the stock currently trades at 170X versus its peer group's average of 26.2X. Additionally, the stock has a PEG ratio of 1.12. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Twilio currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Twilio passes the test. Thus, it seems as though Twilio shares could still be poised for more gains ahead.