5 Best Relative Price Strength Stocks Investors Cannot Miss
The third quarter of 2023 turned out disappointing for Wall Street, marking a stark contrast to the robust bull run in the preceding two quarters. The S&P 500, which monitors the performance of the largest U.S.-listed companies, closed with a 4% decline, primarily due to substantial setbacks in both August and September.
The market landscape grew increasingly worrisome as the Federal Reserve issued a warning about a looming 25 basis point rate hike by the year-end, signifying a prolonged period of elevated interest rates aimed at combating persistent inflation. This led to a significant selloff across major U.S. equity indices, all occurring against the backdrop of the enduring Russia-Ukraine conflict.
Given the potential for sustained volatility in markets, astute investors are turning their attention to stocks demonstrating relative price strength. In this uncertain environment, the strategy of identifying and investing in promising opportunities is prudent, allowing investors to navigate the turbulent waters of the financial markets.
Relative Price Strength Strategy
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 for 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 industry or benchmark. 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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial 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 the five stocks that made it through the screen:
WestRock Company WRK: It is a multinational provider of paper and packaging solutions for consumer and corrugated packaging markets. Over the past 30 days, this Atlanta, GA-based firm saw the Zacks Consensus Estimate for fiscal 2023 move up 5.2%. WRK has a VGM Score of B.
WestRock Company beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 30.7%, on average. WRK shares have gained 13.6% in a year.
Abercrombie & Fitch Co. ANF: Based in New Albany, OH, Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. Over the past 30 days, this firm saw the Zacks Consensus Estimate for fiscal 2024 move up 8.2%. ANF has a VGM Score of A.
The fiscal 2024 Zacks Consensus Estimate for Abercrombie & Fitch indicates 1,644% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 724.8%, on average. ANF shares have surged 236.6% in a year.
American Eagle Outfitters AEO: The company is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15-25 years. Over the past 30 days, this Pittsburgh, PA-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 22.9%. AEO has a VGM Score of A.
American Eagle Outfitters’ expected EPS growth rate for three to five years is currently 15.3%, which compares favorably with the industry's growth rate of 14.5%. It has a trailing four-quarter earnings surprise of roughly 43.2%, on average. AEO shares have increased 52.5% in a year.
American Woodmark Corporation AMWD: It is the manufacturer and distributor of cabinets and similar products. Over the past 30 days, this Winchester, VA-based firm has seen the Zacks Consensus Estimate for fiscal 2024 move up 4%. AMWD has a VGM Score of A.
American Woodmark beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 25.7%, on average. AMWD shares have gained 59.1% in a year.
REV Group, Inc. REVG: REV Group manufactures specialty vehicles, which operate within niche segments like fire and emergency, commercial activities and RVs. The fiscal 2023 Zacks Consensus Estimate for this Brookfield, WI-based firm indicates 38.8% year-over-year earnings per share growth. REVG has a VGM Score of A.
REV Group beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 303.6%, on average. REVG shares have gained 32.7% in a year.
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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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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
American Woodmark Corporation (AMWD) : Free Stock Analysis Report
WestRock Company (WRK) : Free Stock Analysis Report
REV Group, Inc. (REVG) : Free Stock Analysis Report
