5 Stocks With Relative Price Strength Tailwinds at Their Back
While the Fed paused the rate hike after 10 consecutive increases, Chairman Jerome Powell’s hawkish statements have somewhat dented investors’ confidence in risky assets like equities.
In his testimony before the U.S. Congress, Powell reaffirmed his stand that more rate hikes are likely by this year-end. Moreover, the central banks of the UK, Switzerland, Norway and Turkey recently raised their respective benchmark lending rates. Consequently, market participants remained concerned about a near-term recession in the United States as well as globally, with higher interest rates hindering economic activities.
To play this situation, investors who want to stay exposed to the equity setup should focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
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 five of the 20 stocks that made it through the screen:
Royal Caribbean Group RCL: It is a cruise company whose brands primarily serve the contemporary, premium and deluxe segments. The 2023 Zacks Consensus Estimate for Miami, FL-based RCL indicates 162.9% year-over-year earnings per share growth. Royal Caribbean Group has a VGM Score of B.
Over the past 60 days, RCL saw the Zacks Consensus Estimate for 2023 move up 44.8%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. Royal Caribbean Group shares have moved up 190.9% in a year.
Allegiant Travel Company ALGT: It operates a low-cost passenger airline and focuses on linking leisure travelers in small and medium-sized cities to world-class leisure destinations. Over the past 60 days, this Las Vegas, NV-based firm saw the Zacks Consensus Estimate for 2023 move up 38.3%. ALGT has a VGM Score of A.
Allegiant Travel Company beat the Zacks Consensus Estimate for earnings in two of the last four quarters, missed in one and met in the other. It has a trailing four-quarter earnings surprise of roughly 79.8%, on average. ALGT shares have gained 10.5% in a year.
Afya Limited AFYA: Based in Brazil, the company is a leading medical education group. Afya’s expected EPS growth rate for three to five years is currently 22.1%, which compares favorably with the industry's growth rate of 16.8%. The company has a VGM Score of A.
Notably, the 2023 Zacks Consensus Estimate for Afya indicates 28.8% year-over-year earnings per share growth. The company has a market capitalization of $1.3 billion. Afya shares have gone up 39.8% in a year.
Casey’s General Stores CASY: The company operates convenience stores under the Casey's and Casey's General Store names in 16 states. Over the past 60 days, this Ankeny, IA-based firm saw the Zacks Consensus Estimate for fiscal 2024 move up 5.4%. CASY has a VGM Score of A.
Casey’s General Stores beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 7.5%, on average. CASY shares have gained 29.5% in a year.
The Manitowoc Company MTW: Based in Milwaukee, WI, The Manitowoc Company is a leading provider of engineered lifting solutions, including lattice-boom cranes, tower cranes, mobile telescopic cranes and boom trucks. Over the past 60 days, this firm saw the Zacks Consensus Estimate for 2023 move up 31.8%. MTW has a VGM Score of A.
The 2023 Zacks Consensus Estimate for The Manitowoc Company indicates 5.7% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 256.3%, on average. MTW shares have increased 77.7% 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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The Manitowoc Company, Inc. (MTW) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
Casey's General Stores, Inc. (CASY) : Free Stock Analysis Report
Afya Limited (AFYA) : Free Stock Analysis Report
