Irrespective of the prevalence of economic volatility, investors strive to design a portfolio of stocks that will fetch them lucrative returns. As they are parking their hard-earned money in the stock market, they naturally do not want to see it going down the drain, especially in the current uncertain times. However, the task is easier said than done because selecting the right basket of stocks from a plethora of choices at any point of time is no cakewalk.
In want of proper guidance, identifying a winning stock is akin to searching ‘a needle in a haystack’, for an investor. The astute piece of advice in this respect comes from brokers who are deemed experts, equipped with in-depth knowledge and a sharp acumen as far as the field of investing is concerned.
Brokers go through minute details of the publicly available financial documents apart from attending company conference calls and other presentations. Since brokers follow the stocks under their coverage in great detail, they revise their earnings estimates after carefully examining the pros and cons of an event for the concerned company. Estimate revisions serve as an important pointer regarding the price of a stock.
To take care of the earnings performance, we designed a screen based on improving analyst recommendations and upward estimate revisions over the last four weeks.
Revenue Performance not to be Ignored
According to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like a strong dollar or lackluster demand for travel (which will hurt travel-focused companies). Therefore, one must take the top-line performance into consideration as well while formulating a successful strategy. We included in our screen the price/sales ratio as well, 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.
To ensure that the strategy is a winning one, covering all bases, we have added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio the better, companies meeting this criteria are in bottom 10% of our universe of over 7,700 stocks with respect to this ratio. Price greater than 5: A stock trading below $5 will not likely create significant interest for most investors. Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be significant to ensure that these are easily traded. Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by 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:
Atlas Air Worldwide Holdings ( AAWW Quick Quote AAWW - Free Report) : The company is a provider of outsourced aircraft and aviation operating services. Atlas Air is being aided by strong demand for airfreight in the coronavirus-ravaged scenario. Over the past 60 days, the company, presently sporting a Zacks Rank #1 (Strong Buy), has seen the Zacks Consensus Estimate for 2021 earnings being revised 55.9% upward. You can see the complete list of today’s Zacks #1 Rank stocks here. Mesa Air Group ( MESA Quick Quote MESA - Free Report) : The holding company of Mesa Airlines is headquartered in Phoenix, AZ. It operated a fleet of 163 aircraft with approximately 450 daily departures as of Apr 30, 2021. Earnings of this currently Zacks Rank #3 (Hold) stock outpaced the Zacks Consensus Estimate in each of the last four quarters, the average being 621.6%. Atlas Technical Consultants ( ATCX Quick Quote ATCX - Free Report) is domiciled in Austin, TX. This leading provider of Infrastructure and Environmental services currently carries a Zacks Rank #2 (Buy). Atlas Technical Consultants’ bottom-line estimates have increased to earnings of 75 cents against a loss of $1.01 per share over the past 30 days. The Children's Place ( PLCE Quick Quote PLCE - Free Report) : This children's specialty apparel retailer is consistently making investments to upgrade its omni-channel capabilities as part of its digital transformation strategy. This presently Zacks #1 Ranked stock’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters (lagging estimates in the remaining quarter), the average beat being a massive 2896%. DICK’S Sporting Goods ( DKS Quick Quote DKS - Free Report) : The company , currently sporting a Zacks Rank of 1, operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc. Its bottom line outpaced the Zacks Consensus Estimate in each of the last four quarters, the average being 136.8%.
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. 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 .