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Strong Relative Price Strength Makes These 5 Stocks a Buy
We are into the back half of the year and inflation continues to surprise on the upside. As measured by CPI data, it soared to a 41-year high in June. Together with the Russia-Ukraine war, rising-rate worries and a chorus of growth warnings, Wall Street posted the worst first half of a year in decades. In fact, the broad-market S&P 500 Index fell into the bear market during this period.
But all is not lost. For starters, the labor market remains strong, with unemployment near a 50-year low. Consumer demand, though having slowed, remains robust. Meanwhile, corporate earnings reports have largely held up in the early reporting cycle. However, such positive developments are in the minority, and most of the current macroeconomic signals are overwhelmingly bearish.
In addition to fears that the Fed's aggressive monetary stance to fight mounting inflation could push the economy into a recession, per a large section of market watchers, prolonged supply-chain devastation stemming from China's stringent COVID-19 curbs and the termination of the easy-money policy are likely to reduce aggregate demand, slowing the economy in the process. In other words, it is likely that the mayhem will continue in the near term amid growing concerns about rising interest rates and economic sluggishness.
In the current jittery market environment, for investors who might want to stay exposed to the equity setup, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
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 for 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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial 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.
Here are five of the 14 stocks that made it through the screen:
Equinor ASA: The Stavanger, Norway-based firm is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. Founded in 1972, Equinor has a VGM Score of A.
For 2022, EQNR has a projected earnings growth rate of 99.7%. Valued at around $111.9 billion, Equinor shares have gained around 78.3% in a year.
Greif, Inc.: Greif, based in Delaware, OH, is a leading global producer of industrial packaging solutions and services with manufacturing facilities located in over 40 countries. The company's expected EPS growth rate for three to five years is currently 10%, which compares favorably with the industry's growth rate of 9.6%. GEF has a VGM Score of A.
Notably, Greif beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 22.9%, on average. GEF shares have gone up around 14.6% in a year.
Richardson Electronics, Ltd.: The LaFox, IL-based firm is an electronics parts manufacturer and distributor. Founded in 1947, Richardson Electronics has a VGM Score of B.
For fiscal 2022, RELL has a projected earnings growth rate of 332%. Valued at around $222 million, Richardson Electronics shares have surged around 102.2% in a year.
Mercer International Inc.: Mercer International is a leading producer of premier grade pulp. The 2022 Zacks Consensus Estimate for this New York-based firm indicates 46.9% year-over-year earnings per share growth. MERC has a VGM Score of B.
Mercer International beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 5%, on average. MERC shares have gained around 34.7% in a year.
TFI International Inc.: TFI International provides a range of transportation and logistics services in North America. The 2022 Zacks Consensus Estimate for the Canada-based firm indicates 30.2% year-over-year earnings per share growth. TFII has a VGM Score of A.
TFI International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.9%, on average. TFII shares have lost around 10.7% in a year.
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
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Zacks.com featured highlights Equinor, Greif, Richardson Electronics, Mercer International and TFI International
For Immediate Release
Chicago, IL – July 22, 2022 – Stocks in this week’s article are Equinor ASA (EQNR - Free Report) , Greif, Inc. (GEF - Free Report) , Richardson Electronics, Ltd. (RELL - Free Report) , Mercer International Inc. (MERC - Free Report) and TFI International Inc. (TFII - Free Report) .
Strong Relative Price Strength Makes These 5 Stocks a Buy
We are into the back half of the year and inflation continues to surprise on the upside. As measured by CPI data, it soared to a 41-year high in June. Together with the Russia-Ukraine war, rising-rate worries and a chorus of growth warnings, Wall Street posted the worst first half of a year in decades. In fact, the broad-market S&P 500 Index fell into the bear market during this period.
But all is not lost. For starters, the labor market remains strong, with unemployment near a 50-year low. Consumer demand, though having slowed, remains robust. Meanwhile, corporate earnings reports have largely held up in the early reporting cycle. However, such positive developments are in the minority, and most of the current macroeconomic signals are overwhelmingly bearish.
In addition to fears that the Fed's aggressive monetary stance to fight mounting inflation could push the economy into a recession, per a large section of market watchers, prolonged supply-chain devastation stemming from China's stringent COVID-19 curbs and the termination of the easy-money policy are likely to reduce aggregate demand, slowing the economy in the process. In other words, it is likely that the mayhem will continue in the near term amid growing concerns about rising interest rates and economic sluggishness.
In the current jittery market environment, for investors who might want to stay exposed to the equity setup, it is time to focus on good investment opportunities. One of the ways such potential plays could be identified is to look for signs of relative price strength.
Relative Price Strength Strategy
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 for 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 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial 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.
Here are five of the 14 stocks that made it through the screen:
Equinor ASA: The Stavanger, Norway-based firm is one of the premier integrated energy companies in the world, with operations spreading across 30 countries. Founded in 1972, Equinor has a VGM Score of A.
For 2022, EQNR has a projected earnings growth rate of 99.7%. Valued at around $111.9 billion, Equinor shares have gained around 78.3% in a year.
Greif, Inc.: Greif, based in Delaware, OH, is a leading global producer of industrial packaging solutions and services with manufacturing facilities located in over 40 countries. The company's expected EPS growth rate for three to five years is currently 10%, which compares favorably with the industry's growth rate of 9.6%. GEF has a VGM Score of A.
Notably, Greif beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 22.9%, on average. GEF shares have gone up around 14.6% in a year.
Richardson Electronics, Ltd.: The LaFox, IL-based firm is an electronics parts manufacturer and distributor. Founded in 1947, Richardson Electronics has a VGM Score of B.
For fiscal 2022, RELL has a projected earnings growth rate of 332%. Valued at around $222 million, Richardson Electronics shares have surged around 102.2% in a year.
Mercer International Inc.: Mercer International is a leading producer of premier grade pulp. The 2022 Zacks Consensus Estimate for this New York-based firm indicates 46.9% year-over-year earnings per share growth. MERC has a VGM Score of B.
Mercer International beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 5%, on average. MERC shares have gained around 34.7% in a year.
TFI International Inc.: TFI International provides a range of transportation and logistics services in North America. The 2022 Zacks Consensus Estimate for the Canada-based firm indicates 30.2% year-over-year earnings per share growth. TFII has a VGM Score of A.
TFI International beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.9%, on average. TFII shares have lost around 10.7% in a year.
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
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1955618/strong-relative-price-strength-makes-these-5-stocks-a-buy
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.