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Recent Analyst Upgrade Adds Sheen to These 5 Stocks
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The gradual re-opening of economies has resulted in an uptick in activities. Evidently, China’s GDP grew 6.5% in the fourth quarter of 2020, per the National Bureau of Statistics data. The availability of vaccines to combat the coronavirus and the subsequent commencement of immunization programs across the globe added to this optimism.
Despite this buoyancy, the recent surge in COVID-19 cases in the United States and the renewed lockdowns in the UK, Ireland and some other countries in the EU following the detection of a new strain in the United Kingdom that spiked the infection raise a concern and might dampen the recent recovery. This is likely to increase the uncertainty.
Notwithstanding this uncertain scenario, investors would like to rake in profits from their portfolio of stocks. However, even in the best of times, it is not easy to individually design a winning basket of stocks as a plethora floods the market at any given point of time. The coronavirus-induced volatile environment makes the task even more herculean.
What is the Way Forward?
Against this backdrop, it is in the best interest of investors to seek guidance from “experts in the field”. The concerned experts are brokers. The opinion of brokers is a valuable guide for investors while taking a call (buy, sell or hold) on a particular stock. Broker ratings are backed by sound logic. They have deeper insight into the happenings of a particular company as they directly communicate with management.
They do extensive research on the company’s publicly available financial statements apart from attending conference calls. In a bid to enrich their understanding of a particular stock, they sometimes interact with customers to find out their likes/dislikes about the products and services offered by the company.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide an unbiased opinion to investors after a thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Earnings Estimate Revisions: A Useful Guide
As indicated above, brokers follow stocks under their coverage minutely. They revise their earnings estimates on a stock after carefully examining the pros and cons of an event for the concerned company. All the decisions by brokers are supported by solid reason or justification and thus estimate revisions serve as a key determinant in ascertaining a stock price
For instance, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster bottom-line results often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy. To take care of the earnings performance, we designed a screen based on improving analyst recommendation and upward estimate revisions of the past four weeks.
Revenue Performance Not to be Ignored
While we talked about the bottom line in detail, the revenue performance should not be overlooked. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially at a time of revenue weakness due to macroeconomic headwinds like a strong dollar or tepid demand for travel (which will hurt travel-focused companies).
To address the top-line woes, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
Screening Criteria
# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks).
% change in Q (1) est. (4 weeks) = Top #10 (This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).
We have also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days(Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).
Com/ADR/Canadian= Com (This takes out the ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
Camping World Holdings (CWH - Free Report) : Illinois-based Camping World is one of the noted recreational vehicle sellers and component suppliers. The stock carries a Zacks Rank #3 (Hold), currently. The company has a pleasant earnings track record as its bottom line outpaced the Zacks Consensus Estimate in three of the last four quarters, missing the mark on a single occasion. The average beat is 70.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Denver, CO-based Antero Resources Corporation (AR - Free Report) is an independent explorer, primarily engaged in acquiring and developing natural gas, natural gas liquids and oil resources in the Appalachian Basin. The stock carries a Zacks Rank of 3, currently. The Zacks Consensus Estimate for current-quarter earnings indicates 150% growth from the figure reported in the year-ago quarter.
Headquartered in Houston, TX, Callon Petroleum Company is solely focused on exploration, and production of oil and gas resources in the Permian Basin. This presently Zacks #3 Ranked stock has seen the Zacks Consensus Estimate for 2021 earnings being revised 11.50% upward over the past 60 days.
CincinnatiBell , based in Cincinnati, OH, is focused on transforming itself from a legacy copper-based telecommunications entity into a technology company with contemporary fiber assets. The stock currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for current-quarter earnings indicates 15.8% growth from the figure reported in the year-ago quarter.
Beacon Roofing Supply (BECN - Free Report) is the largest distributor of residential and non-residential roofing materials in the United States and Canada. The stock currently carries a Zacks Rank of 2. The company has an impressive earnings history as its bottom line exceeded the Zacks Consensus Estimate in three of the last four quarters while lagging the same in the remaining one. The average beat is 13.6%.
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.
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.
Image: Bigstock
Recent Analyst Upgrade Adds Sheen to These 5 Stocks
The gradual re-opening of economies has resulted in an uptick in activities. Evidently, China’s GDP grew 6.5% in the fourth quarter of 2020, per the National Bureau of Statistics data. The availability of vaccines to combat the coronavirus and the subsequent commencement of immunization programs across the globe added to this optimism.
Despite this buoyancy, the recent surge in COVID-19 cases in the United States and the renewed lockdowns in the UK, Ireland and some other countries in the EU following the detection of a new strain in the United Kingdom that spiked the infection raise a concern and might dampen the recent recovery. This is likely to increase the uncertainty.
Notwithstanding this uncertain scenario, investors would like to rake in profits from their portfolio of stocks. However, even in the best of times, it is not easy to individually design a winning basket of stocks as a plethora floods the market at any given point of time. The coronavirus-induced volatile environment makes the task even more herculean.
What is the Way Forward?
Against this backdrop, it is in the best interest of investors to seek guidance from “experts in the field”. The concerned experts are brokers. The opinion of brokers is a valuable guide for investors while taking a call (buy, sell or hold) on a particular stock. Broker ratings are backed by sound logic. They have deeper insight into the happenings of a particular company as they directly communicate with management.
They do extensive research on the company’s publicly available financial statements apart from attending conference calls. In a bid to enrich their understanding of a particular stock, they sometimes interact with customers to find out their likes/dislikes about the products and services offered by the company.
Of the three types of brokers/analysts (sell-side, buy-side and independent) present in the investment world, sell-side analysts are most common. Various brokerage firms employ them to provide an unbiased opinion to investors after a thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Earnings Estimate Revisions: A Useful Guide
As indicated above, brokers follow stocks under their coverage minutely. They revise their earnings estimates on a stock after carefully examining the pros and cons of an event for the concerned company. All the decisions by brokers are supported by solid reason or justification and thus estimate revisions serve as a key determinant in ascertaining a stock price
For instance, an earnings outperformance by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster bottom-line results often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy. To take care of the earnings performance, we designed a screen based on improving analyst recommendation and upward estimate revisions of the past four weeks.
Revenue Performance Not to be Ignored
While we talked about the bottom line in detail, the revenue performance should not be overlooked. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially at a time of revenue weakness due to macroeconomic headwinds like a strong dollar or tepid demand for travel (which will hurt travel-focused companies).
To address the top-line woes, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
Screening Criteria
# (Up- Down Rating)/ Total (4 weeks) =Top #75 (This gives the list of top 75 companies that have witnessed net upgrades over the last 4 weeks).
% change in Q (1) est. (4 weeks) = Top #10 (This gives the top 10 stocks that have witnessed earnings estimate revisions over the past 4 weeks for the upcoming quarter).
We have also added the following screening parameters to ensure that the strategy is a winning one:
Price-to-Sales = Bot%10 (The lower the ratio the better, companies meeting this criteria are in the bottom 10% of our universe of over 7,700 stocks with respect to this ratio).
Price greater than 5 (as a stock trading below $5 will not likely create significant interest for most of the investors).
Average Daily Volume greater than 100,000 shares over the last 20 trading days(Volume has to be significant to ensure that these are easily traded).
Market value ($ mil) = Top #3000 (This gives us stocks that are the top 3000 in terms of market capitalization).
Com/ADR/Canadian= Com (This takes out the ADR and Canadian stocks).
Here are five of the 10 stocks that made it through the screen:
Camping World Holdings (CWH - Free Report) : Illinois-based Camping World is one of the noted recreational vehicle sellers and component suppliers. The stock carries a Zacks Rank #3 (Hold), currently. The company has a pleasant earnings track record as its bottom line outpaced the Zacks Consensus Estimate in three of the last four quarters, missing the mark on a single occasion. The average beat is 70.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Denver, CO-based Antero Resources Corporation (AR - Free Report) is an independent explorer, primarily engaged in acquiring and developing natural gas, natural gas liquids and oil resources in the Appalachian Basin. The stock carries a Zacks Rank of 3, currently. The Zacks Consensus Estimate for current-quarter earnings indicates 150% growth from the figure reported in the year-ago quarter.
Headquartered in Houston, TX, Callon Petroleum Company is solely focused on exploration, and production of oil and gas resources in the Permian Basin. This presently Zacks #3 Ranked stock has seen the Zacks Consensus Estimate for 2021 earnings being revised 11.50% upward over the past 60 days.
CincinnatiBell , based in Cincinnati, OH, is focused on transforming itself from a legacy copper-based telecommunications entity into a technology company with contemporary fiber assets. The stock currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for current-quarter earnings indicates 15.8% growth from the figure reported in the year-ago quarter.
Beacon Roofing Supply (BECN - Free Report) is the largest distributor of residential and non-residential roofing materials in the United States and Canada. The stock currently carries a Zacks Rank of 2. The company has an impressive earnings history as its bottom line exceeded the Zacks Consensus Estimate in three of the last four quarters while lagging the same in the remaining one. The average beat is 13.6%.
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.
Click here to sign up for a free trial to the Research Wizard today.
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.