The stock market typically shows more volatility during earnings season. This is when we really get to see how well a company is performing and if a stock outperforms analysts’s expectations, it can make quick gains. As such, my Stocks and Shares ISA can see disproportionately strong returns during the season — and that season has just got started. So, here are two companies that are reporting in February that could send my portfolio surging.
This bank looks cheap
Standard Chartered (LSE:STAN) stock looks cheap. The FTSE 100 stock trades with a forward price-to-earnings (P/E) ratio of 8.1 times, indicating a 35% discount compared to its global financial peers. Current forecasts suggests that annual earnings growth will average 12.1% over the next three to five years. This results in a compelling price-to-earnings-to-growth (PEG) ratio of 0.67. No wonder CEO Bill Winters was questioned on the stock’s valuation at Davos last week.
Moreover, banking stocks have delivered very strong earnings reports so far this season. And with Winters noting that they operate in the same global market as its peers, the upcoming Q4 and full-year results may be an opportunity to rectify this valuation gap. Standard Chartered is due to report on 21 February with analysts pointing to earnings around $1.49 per share.
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A key risk for investing in Standard Chartered is its exposure to emerging markets, particularly in Asia, Africa, and the Middle East. While these regions offer growth opportunities, they also expose the bank to heightened geopolitical tensions, regulatory uncertainties, and currency fluctuations. In some respects, the unique selling point is also the biggest risk.
This is a stock I’m following closely and may add to my portfolio.
An undervalued tech stock
Many US-listed technology stocks are starting to look a little expensive, but Zeta Global Holdings (NYSE:ZETA) looks attractively priced at 32 times forward earnings and a PEG ratio of 0.87. This PEG ratio is a considerable 54% discount to the information technology sector average.
This data-driven marketing technology company, which helps businesses optimise customer engagement through advanced analytics and artificial intelligence is also reporting Q4 results on 21 February. The firm has forecasted a huge 39%-41% increase in sales for the quarter, and full-year revenue of $984.1-$988.1m. Positively, all analysts covering the stock have increased their expectations over the past 90 days. Positive ‘revisions’ to analysts’s forecasts are often a great sign.
However, some analysts have highlighted that there may be a downturn in political spending — an important revenue driver — following the US election. That’s something to keep an eye on. Nonetheless, I’m buoyed by the longer-term forecast, with the P/E ratio falling to 14.3 times for 2027. This is based on current estimates, with earnings growing by around 38% annually over the medium term.
I already own this stock, but I’m currently down 10%. I may consider buying more.
A word of caution
While earnings season can be a period where outsized returns are realised, if a company missed expectations, the stock can move in the other direction. Even a beat on earnings but an underwhelming forecast from management can spook the market.
