Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Essent Group (ESNT), which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.
It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Essent Group currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Set to Beat the Market?
Let's discuss some of the components of the Momentum Style Score for ESNT that show why this mortgage insurance and reinsurance holding company shows promise as a solid momentum pick.
Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For ESNT, shares are up 3.07% over the past week while the Zacks Financial - Mortgage & Related Services industry is up 0.34% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 10.35% compares favorably with the industry's 3.3% performance as well.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Essent Group have risen 11.08%, and are up 33.09% in the last year. In comparison, the S&P 500 has only moved 6.23% and 13.1%, respectively.
Investors should also pay attention to ESNT's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. ESNT is currently averaging 461,862 shares for the last 20 days.
The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with ESNT.
Over the past two months, 3 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost ESNT's consensus estimate, increasing from $5.47 to $5.61 in the past 60 days. Looking at the next fiscal year, 2 estimates have moved upwards while there have been no downward revisions in the same time period.
Given these factors, it shouldn't be surprising that ESNT is a #1 (Strong Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Essent Group on your short list.
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Essent Group Ltd. (ESNT) : Free Stock Analysis Report
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