Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, then it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance to provide considerable returns.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0: Positive current quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1: Only Zacks Rank #1 (Strong Buy) stocks – that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years – can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000: A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score less than or equal to B: Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or #2 (Buy) offer the best upside potential.
Here are the six stocks that made it through the screen:
DMC Global Inc. BOOM: DMC Global, headquartered in Boulder, CO, has a suite of products (including explosion-welded clad metal plates, and oil and gas well perforation products) that serves the energy and industrial markets. The firm has a VGM Score of A and an excellent earnings surprise history. It has a 100% track of outperforming estimates over the last four quarters at an average rate of 48.2%.
CommScope Holding Company, Inc. COMM: CommScope Holding Company is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. The 2019 Zacks Consensus Estimate for this Hickory, NC-based company is $2.98, representing some 31.3% earnings per share growth over 2018. Next year’s average forecast is $3.51 pointing to another 17.8% growth. CommScope Holding Company has a VGM Score of B.
Legg Mason, Inc. LM: Legg Mason is a global asset management firm focused on the growth and preservation of its clients' capital through its proprietary mutual funds and separately-managed accounts (SMAs). Sporting a VGM Score of B, this Baltimore, MD-headquartered company’s expected EPS growth rate for three to five years currently stands at 16.2%, comparing favorably with the industry's growth rate of 8.8%.
EZCORP, Inc. EZPW: Founded in 1974 and headquartered in Austin, TX, EZCORP is a leading provider of pawn loans in the U.S., Mexico, Central America, and Peru. The company has a VGM Score of A and good earnings surprise history having surpassed estimates in three of the last four quarters.
Manulife Financial Corporation MFC: Manulife Financial is one of the three dominant life insurers within its domestic Canadian market and possesses rapidly growing operations in the U.S. and several Asian countries. The 2019 Zacks Consensus Estimate for this Toronto-based company is $2.19, representing some 3.8% earnings per share growth over 2018. Next year’s average forecast is $2.35 pointing to another 7.1% growth. Manulife Financial has a VGM Score of A.
ACI Worldwide ACIW: A leading provider of payment software and services to financial institutions, retailers, billers, and payment processors, ACI Worldwide has a VGM Score of B. Over 30 days, the Naples, FL-based company has seen the Zacks Consensus Estimate for 2019 and 2020 increase 4.6% and 17.6%, to $1.14 and $1.40 per share, respectively.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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CommScope Holding Company, Inc. (COMM) : Free Stock Analysis Report
ACI Worldwide, Inc. (ACIW) : Free Stock Analysis Report
EZCORP, Inc. (EZPW) : Free Stock Analysis Report
Legg Mason, Inc. (LM) : Free Stock Analysis Report
Manulife Financial Corp (MFC) : Free Stock Analysis Report
DMC Global Inc. (BOOM) : Free Stock Analysis Report
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