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 in 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 industries or benchmarks. This is because betting on a winner always increases the odds of winning.
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 over a period of 1 to 3 months at the least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results 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.
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 the six stocks that made it through the screen:
Cimpress N.V. CMPR: Cimpress is an online supplier of high-quality graphic design services and customized printed products to small businesses and consumers. The FY 2020 Zacks Consensus Estimate for this Ireland-based company is $3.35, representing some 5% earnings per unit growth over FY 2019. Next fiscal year’s average forecast is $4.35 pointing to another 29.6% growth. Cimpress has a VGM Score of B.
The Buckle, Inc. BKE: A seller of casual apparel, footwear, and accessories for young men and women in the United States, Buckle has a VGM Score of B. Over 30 days, the Kearney, NE-based company has seen the Zacks Consensus Estimate for fiscal years 2020 and 2021 increase 2.2% and 3.1%, to $1.85 and $1.64 per share, respectively.
Crocs, Inc. CROX: Crocs, headquartered in Niwot, CO, is a maker of casual resin-based footwear and accessories. The firm has a VGM Score of B and an excellent earnings surprise history having surpassed estimates in each of the last four quarters.
Capital Product Partners L.P. CPLP: Capital Product Partners is an international owner of product tankers that provide diversified seaborne transportation. The 2019 Zacks Consensus Estimate for this Greece-based partnership is $1.11, representing some 13.3% earnings per share growth over 2018. Next year’s average forecast is $2.03 pointing to another 82.8% growth. Capital Product Partners has a VGM Score of B.
Realogy Holdings Corp. RLGY: A dominant provider of residential real estate brokerage business, Realogy Holdings has a VGM Score of B. Over 30 days, the Madison, NJ-based company has seen the Zacks Consensus Estimate for 2019 and 2020 increase 3.8% and 7.5%, to $1.08 and $1.29 per share, respectively.
RH RH: Founded in 1979 and headquartered in Corte Madera, CA, RH (formerly known as Restoration Hardware) is a leading luxury retailer in the home furnishing space. The company has a VGM Score of B and an impeccable earnings surprise history having surpassed estimates in each of the last four quarters.
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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Capital Product Partners L.P. (CPLP) : Free Stock Analysis Report
Cimpress N.V (CMPR) : Free Stock Analysis Report
Realogy Holdings Corp. (RLGY) : Free Stock Analysis Report
Buckle, Inc. (The) (BKE) : Free Stock Analysis Report
Restoration Hardware Holdings Inc. (RH) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
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