Ampio (AMPE) Upgraded to Buy: Here’s What You Should Know

Investors might want to bet on Ampio Pharmaceuticals (AMPE), as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates — one of the most powerful forces impacting stock prices.

A company’s changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate — the consensus measure of EPS estimates from the sell-side analysts covering the stock — for the current and following years.

Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts, since these are mostly driven by subjective factors that are hard to see and measure in real time. In these situations, the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.

As such, the Zacks rating upgrade for Ampio is essentially a positive comment on its earnings outlook that could have a favorable impact on 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 proven to be strongly correlated with the near-term price movement of its stock. That’s partly because of the influence of institutional investors that use earnings and earnings estimates for calculating 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 transaction of large amounts of shares then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for Ampio 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, so it could be truly rewarding if such revisions are tracked for making an investment decision. Here is where the tried-and-tested 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 related 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 externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see

the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>

.


Earnings Estimate Revisions for Ampio

For the fiscal year ending December 2021, this drugmaker is expected to earn -$0.07 per share, which is a change of 22.2% from the year-ago reported number.

Analysts have been steadily raising their estimates for Ampio. Over the past three months, the Zacks Consensus Estimate for the company has increased 12.5%.


Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of ‘buy’ and ‘sell’ ratings for its entire universe of more than 4000 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.

You can learn

more about the Zacks Rank here >>>

The upgrade of Ampio to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.


Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.


Download FREE: How to Profit from Trillions on Spending for Infrastructure >>

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


To read this article on Zacks.com click here.


Zacks Investment Research