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Find Strong Stocks to Buy for the Market Comeback with this First Profit Screen

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The market dipped on Monday and was a bit mixed through early afternoon trading on Tuesday. The slightly downbeat and subdued start to the week appears to be a welcome and somewhat bullish sign as many bears and market pessimists likely thought a huge pullback was coming after the impressive start to 2023, which has seen tons of stocks climb well over 30% YTD.

The stellar start forced many short-sellers to close their positions on beaten-down growth stocks no matter the possibly bloated prices. It’s growing increasingly difficult to be a bear with the Nasdaq back well above its 200-day moving average that proved elusive for so long. The S&P 500 also trades higher than its 50-week moving average for the first time since early April 2022.

Wall Street appears to be betting that the earnings downturn is already priced in and that the Fed’s inflation flight is all but over. The hot January jobs report did force a slight recalibration. But it is worth stressing that the market already spent a year pricing in the current earnings downturn and higher interest rates.

Many on Wall Street are now growing increasingly sanguine that Jay Powell and the Fed will be able to engineer a soft landing that helps the U.S. economy avoid a recession while simultaneously dragging down inflation.  

The upbeat start to 2023 and growing market positivity might encourage more investors to dive back into stocks. Today, we utilized our Zacks ‘First Profit’ screen to identify potentially winning stocks that turned things around recently and might continue to improve in February and beyond.

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 over 40 stocks that made it through this week's screen…

Box, Inc. ((BOX - Free Report) )

Box’s Content Cloud is a single platform that helps organizations manage the entire content lifecycle, as well as work securely from almost anywhere, and integrate across various apps. Box boasts that it simplifies work for leading global organizations, including AstraZeneca, Morgan Stanley, and many others.

Zacks estimates call for Box’s fiscal 2023 revenue to climb over 13% and then pop another 9% higher in its FY24 to climb above $1 billion. Meanwhile, its adjusted earnings are projected to jump 38% and 23%, respectively.

Box shares have popped 8% YTD and are up roughly 70% in the last five years to match the Zacks Tech sector. Plus, Wall Street is rather high on the stock, with six of the eight brokerage recommendations Zacks has at “Strong Buys.”

Coupang, Inc. ((CPNG - Free Report) )

Coupang is one of the largest e-commerce companies in Asia and it has successfully fended off Amazon and Alibaba in South Korea. The e-commerce powerhouse went public in March 2021. CPNG’s IPO was one of the largest of any foreign firm since Alibaba back in 2014. Coupang shares have tumbled since its debut alongside much of the stock market, especially anything growth related.

Coupang’s offerings include same-day and next-morning delivery of groceries and other general merchandise. On top of that, CPNG offers prepared food delivery services via its Coupang Eats segment.

Beyond e-commerce, Coupang Play is a video streaming service in South Korea and beyond. Coupang posted adjusted earnings of +$0.05 per share in Q3 to top our Zacks estimates and it boosted its outlook.

Coupang is projected to swing from an adjusted loss of -$0.07 per share in 2022 to +$0.30 in FY23, with sales set to climb 12% and 14%, respectively. And Zacks estimates call for Coupang to post positive earnings in Q4, Q1 FY23, and full-year 2023, with its earnings revisions trending in the right direction.

Wall Street is high on the stock and its average Zacks price target offers 44% upside to its current price of around $16.50 per share. 

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.

Click here to sign up for a free trial to the Research Wizard today.

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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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