Back to top

Image: Bigstock

Want to Bet on Relative Price Strength? Try These 4 Stocks

Read MoreHide Full Article

Earnings growth and valuation multiples are indeed important for investors to determine a stock's ability to offer considerable returns. But these are also essential in determining whether a stock’s price performance is better than its peers or the industry average.

If a stock’s performance is lacking that of the broader groups despite impressive earnings growth or valuation multiples, then something must be wrong.

It’s always advisable to stay away from these stocks and bet on those that are outperforming their respective industry or benchmark. This is because betting on a winner always proves to be lucrative.

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 the 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 the four stocks that made it through the screen:

Vale S.A. (VALE - Free Report) : Vale is the world’s largest producer of iron ore, iron ore pellets and nickel. The 2021 Zacks Consensus Estimate for this Rio de Janeiro-based firm indicates 154.03% earnings per share growth over 2020. Vale has a VGM Score of B.

Smith & Wesson Brands, Inc. (SWBI - Free Report) : A leading firearms manufacturer, Smith & Wesson Brands has a VGM Score of A. Over the past 30 days, this Springfield, MA-based firm has seen the Zacks Consensus Estimate for fiscal 2022 improve 100%.

GMS Inc. (GMS - Free Report) : This Tucker, GA-based company is a major North American distributor of wallboard and ceilings systems. GMS has a VGM Score of A and an excellent earnings surprise history of 15.67%, on average, for the last four quarters.

Dillard’s, Inc. (DDS - Free Report) : Dillard is a large departmental store chain featuring fashion apparel and home furnishings. Carrying a VGM Score of B, this Little Rock, AR-headquartered company’s expected EPS growth rate for three to five years is currently 24.3%, which compares favorably with the industry's growth rate of 14.8%.

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.


In-Depth Zacks Research for the Tickers Above


Choose a ticker to receive a FREE report - normally $25 each:


Dillards, Inc. (DDS) - free report >>

VALE S.A. (VALE) - free report >>

GMS Inc. (GMS) - free report >>

Smith & Wesson Brands, Inc. (SWBI) - free report >>