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It is a well-known fact that the advent of coronavirus last year has slowed down economic activities so far. The COVID-led disruptions hurt almost all corners of the investment world with investors on the edge due to prevalent uncertainties.
This unprecedented crisis is unlikely to end any time soon even though vaccines to combat this deadly disease are now available in the market. With immunization programs having started in a few countries only thus far, it will take a while before inoculating the entire global population. Further adding to the woes is the discovery of a new COVID strain in the United Kingdom last month.
Despite this topsy-turvy scenario, investors will aim for a winning portfolio of stocks so that they garner lucrative returns. Amid the prevalent confusion, it is almost impossible for individual investors to come up with a promising portfolio of stocks without proper guidance. Therefore, it is in their best interest to seek advice from “experts in the field".
The concerned experts are brokers who irrespective of their types (sell-side, buy-side or independent) embark on a thorough research of the stocks under their coverage. They have at their disposal a lot more information on a company and its prospects than individual investors. To this end, they go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. As a result, a broker’s opinion should act as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock.
The action of brokers is by no means arbitrary and is indeed guided by sound logic. Thus, the direction of estimate revisions serves as an important pointer regarding the price of a stock.
For example, a company’s earnings beat generally leads to upward estimate revisions with prices moving north. Similarly, a stock may fall out of analysts’ favor due to adverse events like pipeline failure (for a biotech player). Earnings estimate cut by brokers often causes stock price depreciation. Naturally, investors will dump such stocks on the basis of broker assessment.
Revenue Performance not to be Ignored
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar or lackluster demand for travel (which will weigh on travel-focused companies). Therefore, one must take the top-line performance into consideration as well while formulating a winning strategy. We included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
# (Up-Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks.
% change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter.
Price-to-Sales = Bot%10: The lower the ratio, the better. Companies meeting this criterion are in the bottom 10% of our universe of over 7,700 stocks.
Price greater than 5: A stock trading below $5 will not likely be of significant interest to most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 in terms of market capitalization.
Here are 5 of the 10 stocks that passed the screen test:
Headquartered in New York, ABM Industries ABM is a provider of integrated facility solutions in the United States and internationally. The stock, currently carrying a Zacks Rank #2 (Buy), has seen the Zacks Consensus Estimate for current-year earnings being revised 3.9% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ManpowerGroup MAN) is one of the leading providers of innovative workforce solutions and services across the globe. The company, currently carrying a Zacks Rank of 2, has outshined the Zacks Consensus Estimate for earnings in three of the last four quarters. It reported lower-than-expected bottom line in the remaining quarter, the average beat being 32.9%.
Builders FirstSource BLDR: Based in Dallas, TX, the company supplies and manufactures a range of building materials and components as well as provides construction services. The stock, currently carrying a Zacks Rank #3 (Hold), has seen the Zacks Consensus Estimate for 2021 earnings being revised 9.7% upward over the past 60 days.
Headquartered in Hamilton, Bermuda, Signet Jewelers SIG is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, U.K., the Republic of Ireland and the Channel Islands. The stock presently carries a Zacks Rank of 3. The expected earnings per share growth rate (3-5 years) for the stock is currently pegged at 8%.
Headquartered in Dallas, TX, Tenet Healthcare Corporation THC is an investor-owned health care services company. The stock, currently sporting a Zacks Rank #1, has seen the Zacks Consensus Estimate for 2021 earnings being revised 12.1% upward over the past 60 days.
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.
Click here to sign up for a free trial to the Research Wizard today.
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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ManpowerGroup Inc. (MAN) : Free Stock Analysis Report
ABM Industries Incorporated (ABM) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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