Earnings growth and valuation multiples are indeed important for investors to determine a stock’s ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.
If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.
It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industries or benchmarks. This is because betting on a winner always proves to be lucrative.
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 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.
Screening Parameters
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 five of the 35 stocks that made it through the screen:
Suncor Energy Inc.
SU
: Suncor is Canada’s premier integrated energy company. The 2021 Zacks Consensus Estimate for this Calgary, Alberta-based firm indicates 248.18% earnings per share growth over 2020. Suncor has a VGM Score of B.
Ally Financial Inc.
ALLY
: A diversified financial services company providing a broad array of offerings, Ally has a VGM Score of B. Over the past 30 days, this Detroit, MI-based firm has seen the Zacks Consensus Estimate for 2021 improve 31.5%.
CNH Industrial NV
CNHI
: This London, UK-based company offers vehicles for agricultural and industrial purposes. CNH Industrial has a VGM Score of A and an excellent earnings surprise history, having surpassed estimates in each of the last four quarters by 176.25%, on average.
Freeport-McMoRan Inc.
FCX
: Freeport-McMoRan is primarily engaged in mineral exploration and development; mining and milling of copper, gold, molybdenum and silver. Sporting a VGM Score of B, this Phoenix, AZ-headquartered company’s expected EPS growth rate for three to five years currently stands at 28.1%, which compares favorably with the industry’s growth rate of 23%.
Red Rock Resorts, Inc.
RRR
: Founded in 2015 and headquartered in Las Vegas, NV, Red Rock Resorts is the leading provider of gaming and entertainment to the local residents. The company has a VGM Score of B and an enviable earnings surprise history. It surpassed estimates in each of the last four quarters, delivering an earnings surprise of 166.20%, on average.
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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