Were these Post-Earnings Reactions Fundamentally Justified? – Daktronics, Inc. (DAKT) and More

Surprisingly, there have been a lot of investors suggesting that the stock did not deserve this move higher, however I beg to differ. I think it was well-deserved. The company has flown under the radar thanks to success from other restaurants such as Chipotle Mexican Grill, Inc. (NYSE:CMG), Panera Bread Co (NASDAQ:PNRA), and Buffalo Wild Wings (NASDAQ:BWLD), and therefore trades with a price/sales of just 0.55 and a forward P/E ratio of just 21.5 (not too expensive in this industry). As a result, this might be the best buy in the space, with it being significantly cheaper than other restaurant stocks on a revenue/valuation basis and with it having such strong margins.

Conclusion

In my book I examine human behavior and the psychological effects that take place when a stock shoots higher or falls drastically lower (think roulette at a casino). For many investors, chasing these trends is common, even addicting, and very few are capable of realizing their losses as a result of the occasional gain. My suggestion is to always look at the news that caused the movement to occur, and to then determine if the movement was worth the news. Most people look at the performance first and then briefly look over the news; yet finding the inconsistencies between the performance and the fundamentals is what will ultimately create value and large gains.

The article Were these Post-Earnings Reactions Fundamentally Justified? originally appeared on Fool.com and is written by Brian Nichols.

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