Anatomy Of Success: Green Dot Corporation (GDOT)

When a company has earned the coveted Zacks Rank #1 (Strong Buy) they have a high probability of outperforming the market over the next 1 to 3 months. And if you are just getting started, this is a great way to help you identify the best companies in which to invest.

The ranking system finds companies both big and small that have the right characteristics to produce superior gains. Achieving a Rank of #1 is not easy, as only 5% of companies within the Zacks Rank universe earn this position. The example below illustrates how a company was added to the Zacks Rank #1 list, and remained on the list post several strong earnings reports as it continued to see price appreciation beyond the three month period.

Example Green Dot Corporation (GDOT)

Green Dot Corporation (GDOT), is a technology-centric, pro-consumer Bank Holding Company with a mission to reinvent personal banking for the masses. The company is the largest provider of prepaid debit card products and prepaid card reloading services in the United States, as well as a leader in mobile banking with its GoBank mobile bank account offering. Green Dot Corporation products are available to consumers at more than 80,000 retailers nationwide, online and via the leading app stores. The company is headquartered in Pasadena, California.

On February 24th, 2017, Green Dot Corp was added to the Zacks Rank #1 (Strong Buy) list just after the company reported Q4 earnings results where they beat both top and bottom line expectations. The company announced a multi-step program for 2017 with an emphasis on improving revenues from its cash back cards, additional placements within 100,000 new stores, Uber driver Instant Pay, and mobile banking. At the close of the bell on February 24th, the stock price was $29.48.

Then on May 10th, the company reported Q1 earnings where they once again beat the Zacks consensus earnings and revenue estimates by posting record setting financial results as its multi-step plan began to start to show on the top line (+11.1% YoY). Management also increased both EPS and revenue guidance for the year, well above expectations. This news caused analysts to increase its earnings estimates as well. Three months after GDOT was added to the Zacks Rank #1 list (May 24th) the stock price closed at $36.35, a +23.3% increase.

On August 9th, the company reported Q2 results, and once again they beat both top and bottom line expectations, and increased both EPS and Revenue guidance for FY 17. Revenues jumped up another +28.3% YoY. Management cited improving active cards, Uber driver Instant Pay, and Rush purchase volumes as the main drivers behind the successful quarter. Once again analysts increased future earnings guidance. Six months after becoming a Zacks Rank #1 (August 24th) the stock price was at $47.41, a +60.8% gain.

Then on November 8th, the company reported Q3 results where they beat estimates and raised both EPS and revenue guidance for the third time in the year. Revenue growth rose to +30% YoY, and total active cards increased by +28% YoY, and begun to show organic growth (+5%) for the first time since Q215. Like the previous three quarters analysts increased their future earnings estimates. Nine months after becoming a Zacks Rank #1 the stock price closed (November 24th) at $63.34, a +114.9% increase.

Going into its Q4 earnings announcement, the stock price slipped just a bit, but as of February 1, 2018, the stock price closed at $61.78, for a gain of +110%.

The table below shows the price performance of GDOT (in green), and the 12 month forward looking EPS estimate (in red) from when it became a Zacks Rank #1 till the close of the bell February 6th.

Overall, by utilizing the Zacks Ranking system, you can easily identify the elite stocks which are best positioned to beat the market on a consistent basis, and how to stay in those top stocks as they continue to grow.

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