Falling Earnings Estimates Signal Weakness Ahead for Wet Seal (WTSL) - Tale of the Tape

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 Wet Seal Inc. (WTSL) 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 WTSL.  
 
A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 5 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 a loss of 26 cents a share a month ago to its current level of a loss of 32 cents.

Also, for the current quarter, Wet Seal has seen 3 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to a loss of 24 cents a share from a loss of 16 cents over the past 30 days.    

The stock also has seen some pretty dismal trading lately, as the share price has dropped 11.4% in 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 consumer goods sector, you may instead consider some better-ranked stocks including Christopher & Banks Corporation (CBK), Belle International Holdings Limited (BELLY) and Li Ning Company Limited (LNNGY).  While Belle International Holdings and Li Ning Company Limited carry a Zacks Rank #2 (Buy), Christopher & Banks holds a Zacks Rank #1 (Strong Buy) and may be better selections at this time.  

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 >>

BELLE INTL HLDG (BELLY): Get Free Report

CHRISTOPHER&BNK (CBK): Free Stock Analysis Report

LI NING COMPANY (LNNGY): Get Free Report

WET SEAL INC -A (WTSL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research