Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.
One such stock that you may want to consider dropping is Restoration Hardware Holdings, Inc. (RH), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in RH.
A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen eight estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from $1.64 a share a month ago to its current level of $1.24.
Also, for the current quarter, Restoration Hardware has seen seven downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to 65 cents a share from $1.08 over the past 30 days.
The stock also has seen some pretty dismal trading lately, as the share price has dropped 25.3% n the past month.
So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.
If you are still interested in the Retail – Home Furnishings industry, you may instead consider a better-ranked stock – At Home Group Inc. (HOME). The stock currently holds a Zacks Rank #2 (Buy) and may be a better selection at this time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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