Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
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 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 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 11 stocks that made it through the screen:
Belden (NYSE:BDC) Inc. BDC: Founded in 1902 and headquartered in Saint Louis, MO, Belden is a provider of innovative signal transmission solutions. The company has a VGM Score of B and an excellent earnings surprise history. It surpassed estimates in each of the last four quarters, delivering an earnings surprise of 27.67%, on average.
The TJX Companies (NYSE:TJX), Inc. TJX: It is a leading worldwide off-price retailer of apparel and home fashions. The TJX Companies has a VGM Score of B. Over the past 30 days, this Framingham, MA-based firm has seen the Zacks Consensus Estimate for fiscal 2022 improve 12.2%.
Comstock Resources (NYSE:CRK), Inc. CRK: Comstock Resources is a leading natural gas producer in the Haynesville shale. The 2021 Zacks Consensus Estimate for this Frisco, TX-based firm indicates 378.26% earnings per share growth over 2020. Comstock has a VGM Score of A.
Greif (NYSE:GEF), Inc. GEF: Greif is a leading global producer of industrial packaging products and services. The company’s expected EPS growth rate for three to five years is currently 10%, which compares favorably with the industry's growth rate of 9.7%.
Group 1 Automotive (NYSE:GPI), Inc. GPI: It is one of the leading automotive retailers in the world, with operations primarily located in the United States, UK and Brazil. The 2021 Zacks Consensus Estimate for this Houston, TX-based firm indicates 76.3% earnings per share growth over 2020. Group 1 Automotive has a VGM Score of A.
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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