5 Relative Price Strength Stocks for Considerable Returns
Wall Street closed August on a downbeat note, with the S&P 500 posting its weakest monthly performance since February, down 1.8%. The specter of inflation continues to loom despite a gradual decline. Fed Chairman Jerome Powell's warning of further interest rate hikes has cast a pall over the investing outlook. As it is, September is traditionally one of the market's weakest months.
Although recent economic data shows a cooling U.S. economy, with second-quarter 2023 GDP growth revised down to 2.1%, one bright spot remains, i.e., robust personal consumption expenditure, a major driver of GDP. This resilience suggests that the economy may not be headed for an immediate recession.
In such an unpredictable landscape, astute investors seeking equity exposure should focus on promising opportunities. One effective strategy involves identifying signs of relative price strength in potential plays.
Relative Price Strength Strategy
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures a winning option on your hands.
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 five of the 16 stocks that made it through the screen:
Sterling Infrastructure, Inc. STRL: The company provides transportation, building, and e-solutions in construction and engineering projects. Over the past 30 days, this Woodlands, TX-based firm saw the Zacks Consensus Estimate for 2023 move up 16.2%. STRL has a VGM Score of A.
Sterling Infrastructure 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 14.9%, on average. STRL shares have rocketed 242.8% 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 saw the Zacks Consensus Estimate for fiscal 2024 move up 5.4%. 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 59.7% in a year.
Modine Manufacturing Company MOD: It specializes in engineered thermal management solutions for use in automotive applications. Over the past 30 days, this Racine, WI-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 15.7%. MOD has a VGM Score of A.
Modine Manufacturing Company’s expected EPS growth rate for three to five years is currently 25%, which compares favorably with the industry's growth rate of 23%. It has a trailing four-quarter earnings surprise of roughly 44.7%, on average. MOD shares have increased 237.8% in a year.
Karat Packaging Inc. KRT: The company is a significant player in single-use disposable products made of eco-friendly materials. The 2023 Zacks Consensus Estimate for this Chino, CA-based firm indicates 40.8% year-over-year earnings per share growth.
Karat Packaging 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 48.8%, on average. KRT shares have gained 40.3% in a year.
Carpenter Technology Corporation CRS: Based in Philadelphia, PA, Carpenter Technology is a producer and distributor of premium specialty alloys. Over the past 30 days, this firm saw the Zacks Consensus Estimate for fiscal 2024 move up 3.6%. CRS has a VGM Score of B.
The Zacks Consensus Estimate for Carpenter Technology’s fiscal 2024 earnings indicates 205.3% year-over-year growth. It has a trailing four-quarter earnings surprise of roughly 10%, on average. CRS shares have increased 98.5% in a year.
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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Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
American Woodmark Corporation (AMWD) : Free Stock Analysis Report
Sterling Infrastructure, Inc. (STRL) : Free Stock Analysis Report
Modine Manufacturing Company (MOD) : Free Stock Analysis Report
Karat Packaging Inc. (KRT) : Free Stock Analysis Report
