4 Stocks Trading Near 52-Week High That Can Climb Further
Stocks hitting their 52-week high and delivering consistent performance in the past few quarters offer attractive opportunities to investors while building a portfolio. This is because stocks near that level are perceived to be winners. However, stocks touching a new 52-week high are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Molson Coors TAP, Dave & Buster's Entertainment PLAY, Enersys ENS and KB Home KBH are expected to maintain the momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here we discuss a strategy to find the right stocks. The strategy borrows from the basics of momentum investing. This technique bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many a time, stocks hitting a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
In fact, overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers, in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .11
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.11 implies that the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 8
This parameter will help screen stocks that are trading at $8 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are four stocks of the 11 stocks that made it through the screen:
Molson Coors is a global manufacturer and seller of beer and other beverage products. The company has been benefiting from strength in core brands, as well as the above-premium portfolio. Molson Coors is on track with its revitalization plan focused on achieving sustainable top-line growth by streamlining the organization and reinvesting resources into its brands and capabilities.
The company intends to invest in iconic brands and growth opportunities in the above-premium beer space; expand in adjacencies and beyond beer; and create digital competencies for commercial functions, supply-chain-related system capabilities and employees. To facilitate these investments, TAP plans to generate savings of $150 million by simplifying its structure.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for TAP Energy’s 2023 earnings has been revised upward by 1.5% to $4.61 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 32.06%.
Dave & Buster's Entertainment is a leading owner and operator of high-volume venues in North America that combines dining and entertainment for both adults and families. Dave & Buster's continues to pursue a disciplined new store growth strategy in new and existing markets to drive growth.
In fiscal 2023, the company intends to open 16 new stores (including 11 Dave & Buster's and 5 Main Event locations) and relocate Dave & Buster's Vernon Hills store. The company recently inked a deal with the Malpani Group to open 15 new stores in India. Also, it partnered with the NightOwl Entertainment Group to open five stores in Australia. These strategic moves mark the company’s second and third multi-store franchise agreements, respectively, in the APAC and MEA regions.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for PLAY’s fiscal 2023 earnings has increased 2.3% to $3.58 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 6.81%.
EnerSys engages in manufacturing, marketing and distribution of various industrial batteries. The company is set to benefit from solid product offerings, healthy backlogs and strengthening demand. Strength in broadband, data center and telecom businesses, and favorable pricing actions bode well for the company’s Energy Systems segment. A solid backlog of $1.3 billion at the end of fourth-quarter fiscal 2023, driven by order trends across all business segments is reflective of its opportunities in the near term. Handsome rewards to its shareholders raise the stock's attractiveness.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for ENS’ fiscal 2024 earnings has increased 3.7% to $7.09 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 9.03%.
KB Home is a well-known homebuilder in the United States and one of the largest in the state. KBH invests aggressively in land acquisition and development, mainly in high-end locations, critical for community count and top-line growth. This has eventually helped the company in reducing debt. The company’s success in increasing scale and profitability, improving asset efficiency and monetizing deferred tax assets under the Returns-Focused Growth Plan has, in turn, enabled it to generate solid operating cash flow. The company intends to focus on increasing Built-to-Order sales that will, in turn, help it gain sales momentum in 2024.
The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for KB Home’s 2023 earnings has been revised upward by 19.1% to $6.30 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 20.66%.
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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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Molson Coors Beverage Company (TAP) : Free Stock Analysis Report
KB Home (KBH) : Free Stock Analysis Report
Enersys (ENS) : Free Stock Analysis Report
Dave & Buster's Entertainment, Inc. (PLAY) : Free Stock Analysis Report
