The Zacks Ranking system is designed to help investors identify how a stock is expected to move over a one to three-month time frame.
Specifically, a company that receives the coveted #1 (Strong Buy) rating has a demonstrable history of outperforming the markets over that time period; only 5% of the Zacks Rank universe earns this rating. This methodology not only helps you discover these companies, but it also enables investors to stay hold the stock while it continues to appreciate in value.
Below is an example that shows investors how they could have realized an over 102% gain in 11 months by following the Zacks Rank.
Autohome Inc. (ATHM - Free Report)
Based in Beijing, Autohome offers an online destination for automobile consumers primarily in the People's Republic of China. Through its websites (autohome.com.cn and che168.com), the company delivers content to automobile buyers and owners. It also offers advertising services; dealer subscription services; used automobile listings services; automobile dealer subscription services, as well as operates automotive aftermarket services platform and real-time feedback on the service providers.
ATHM first became a Strong Buy stock back on July 14 for a solid run, most likely due to overarching analyst bullishness, and closed that trading day at $47.78 per share.
Heading into its third quarter fiscal 2017 earnings release, ATHM was a #1 (Strong Buy). Q3 was a strong quarter for auto company, with revenues of $233 million increasing 5% year-over-year and net income growing well over 60% from the prior-year period. ATHM continued to focus on mobile traffic, and the number of average daily unique visitors to its “Autohome” app increased 28% year-over-year. The stock was actually added to the Strong Buy about a month earlier on October 13, and four months after first becoming a #1 pick, the company’s stock price increased over 26% to $60.46 per share.
Autohome was made a #1 stock again on March 16 after it reported impressive fourth quarter results. Earnings easily beat the Zacks Consensus Estimate, while revenues of $269 million exceeded the high end of the company’s original guidance. Additionally, its media services and leads generation services revenues segment revenues saw a double-digit increase of 30.9% year-over-year. ATHM is also expanding a SaaS platform for used car dealers across China, and as of February, that initiative covered over 34,000 dealers. Nine months after becoming a Zacks Rank #1, shares of ATHM increased about 80% to $86.20.
Autohome has been able to maintain its presence on the Strong Buy list ever since; its currently a #1 (Strong Buy) on the Zacks Rank. Shares currently trade at around $96.80, up over 102% from when the company was first made a Strong Buy stock.
Here, this table shows the price performance of ATHM (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, ATHM never moved lower than a Zacks Rank #3 (Hold).
By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.
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