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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 CAI International (CAI), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.
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. CAI International currently has a Zacks Rank of #2 (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?
In order to see if CAI is a promising momentum pick, let's examine some Momentum Style elements to see if this transportation finance and logistics company holds up.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. 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 CAI, shares are up 11.35% over the past week while the Zacks Transportation - Equipment and Leasing industry is up 2.32% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 13.1% compares favorably with the industry's 15.81% performance as well.
While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Shares of CAI International have increased 27.49% over the past quarter, and have gained 27.98% in the last year. On the other hand, the S&P 500 has only moved 10.25% and 18.86%, respectively.
Investors should also pay attention to CAI'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. CAI is currently averaging 152,497 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 CAI.
Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions helped boost CAI's consensus estimate, increasing from $3.24 to $3.62 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.
Given these factors, it shouldn't be surprising that CAI is a #2 (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 CAI International on your short list.
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CAI International, Inc. (CAI) : Free Stock Analysis Report
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