Utilize this 'First Profit' Screen to Help Find Stocks to Buy in February
The market climbed on Tuesday, with the Nasdaq up 1.3%, while the S&P 500 popped 0.8%, and the Dow jumped 1.1%. There was no major catalyst and the market has now chopped around over the last several sessions after Facebook/Meta and a few other names sent the market sharply lower last week.
Many of the most well-known mega-cap technology stocks have now reported, with the next big wave of results set to come from retailers. Even though the 10-year U.S. treasury touched 1.97% on Tuesday and Wall Street is worried about the potential for relatively significant rate hikes starting in March, market sentiment appears improved compared to where we were just a few weeks ago.
Even in the face of all the legitimate worries, coupled with fears of a rough or at least tepid year on Wall Street after three years of huge gains, investors don’t necessarily want to remain on the sidelines. In fact, staying constantly exposed to the market, as difficult as it can be during stretches of selling, is often the most prudent long-term strategy.
Given this backdrop, investors might consider adding stocks in February, and the Zacks ‘First Profit’ screen is a solid place to jump-start the search…
First Profit
The idea is to search for companies that recently reported their first quarterly profit. More specifically, the screen searches for firms that just posted their first profit last quarter, after not posting a profit for at least the previous four quarters.
Finding companies that recently reported their first profits help investors find stocks that can prove to be big winners. These companies may vary widely. Some of the firms might be new, and this recent profit is perhaps the only profit in its short history.
Meanwhile, other companies might have held an impressive and long history of quarterly profitability, but for whatever reason haven't seen a profit in a while. Therefore, the return to profit could spark a turning point that management had promised or Wall Street had been clamoring for.
The concept is relatively simple: if the trend has been one of improvement, there is a solid chance the trend will continue. This is true whether a company has been profitable, or is just reaching that key inflection point.
And that’s what we are screening for today…
• EPS for the previous 4 Quarters less than or equal to 0
(This means in each of the previous 4 quarters (except the most recently reported quarter) the company has reported earnings of less than or equal to zero, i.e., no profit.)
• EPS for the recently reported quarter greater than 0
(This time, the company reported earnings greater than zero, meaning they finally showed a profit.)
• Current Price greater than or equal to 5
(Stocks that are trading for less than $5 are more speculative.)
The screen is pretty simple, yet powerful. Here are two of the nearly 50 stocks that made it through this week's screen…
Vermilion Energy VET
Vermilion is an international energy producer that seeks to create value through the acquisition, exploration, development and optimization of producing assets. Vermilion's operations are focused on the exploitation of light oil and liquids-rich natural gas conventional resource plays in North America, as well as the exploration and development of conventional natural gas and oil opportunities in Europe and Australia.
Vermilion is a Zacks Rank #1 (Strong Buy) at the moment and it is part of a highly-ranked Oil and Gas - Exploration and Production – International industry. VET stock has soared 190% in the last year to destroy the S&P 500’s 15% climb and its industry’s 115%.
Hyatt Hotels H is a leading global hospitality company. Hyatt’s portfolio currently includes roughly 1,000 hotel and all-inclusive properties in nearly 70 countries across six continents. Hyatt, like many others in the travel and leisure industry, got crushed by covid early on.
Hyatt has started to bounce back in a big way, with its FY21 revenue projected to surge 50% and then climb 76% higher in FY22 to reach $5.5 billion to surpass its pre-covid sales total. And its bottom-line is trending back in the right direction. Hyatt is set to release its Q4 financial results on Wednesday, February 16.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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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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