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4 Stocks Trading Near 52-Week High That Can Scale Higher

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Investors generally consider a 52-week high as a good criterion to determine an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.

Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.

In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.

Stocks such as MYR Group (MYRG - Free Report) , ICF International (ICFI - Free Report) , Universal Insurance Holdings (UVE - Free Report) and Sterling Infrastructure, Inc. (STRL - Free Report) are expected to maintain the momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.

Here we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”

52-Week High: A Good Indicator

Many a time, stocks hitting a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.

Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects, and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.

Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.

Setting the Right Filters

We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.

Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.

Current Price/52 Week High >= .80

This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies that the stock is trading within 20% of its 52-week high range.

% Change Price – 4 Weeks > 0

It ensures that the stock price has moved north over the past four weeks.

% Change Price – 12 Weeks > 0

This metric guarantees a continued upward price momentum for the stock over the past three months as well.

Price/Sales <= XIndMed

The lower, the better.

P/E using F(1) Estimate <= XIndMed

This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.

One-Year EPS Growth F(1)/F(0) >= XIndMed

This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.

Zacks Rank =1 or 2

No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Current Price >= 5

This parameter will help screen stocks that are trading at $5 or higher.

Volume – 20 days (shares) >= 100000

The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.

Here are our four picks of the eight stocks that made it through the screen:

MYR Group is implementing targeted strategies to capture new market opportunities in the evolving clean energy landscape while continuing organic and acquisitive expansion. These make it a solid investment option in the utility sector. Last month, its unit, MYR Group Construction Canada, Ltd. acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd. and its affiliate (“Powerline Plus Companies”). This acquisition will strengthen MYR Group’s transmission and distribution business as well as expand its geographical reach.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for MYRG’s 2023 earnings has increased 4.8% to $5.43 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 13.17%.

ICF International is a provider of professional services and technology-based solutions to government and commercial clients. ICF has a broad global presence with 53 regional offices across the United States and 24 offices outside the country. Its global presence and diversity of markets ensure consistent revenue growth. Buyouts help enhance subject matter knowledge, expand offerings and provide scale in particular geographies. The acquisition of Creative Systems and Consulting is expected to expand ICF International’s federal IT modernization/digital transformation capabilities with leading Salesforce and Microsoft implementation teams.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for ICF’s 2023 earnings has increased 7.3% to $6.30 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 9.21%.

Universal Insurance operates as an integrated insurance holding company in the United States. The company is currently engaged in insurance underwriting, distribution and claims. UVE generates revenues from the collection and investment of premiums. UVE’s agency operations generate income from policy fees, commissions, premium financing referral fees and the marketing of ancillary services. Prudent underwriting, rate increase, opportunistic growth in Florida and other states, and accelerated use of digital technology bode well for growth. A strong reinsurance program supports a resilient balance sheet.

The company currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for UVE’s 2023 earnings has increased 10% to $1.65 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 101.69%.

Sterling Infrastructure specializes in E-Infrastructure, Building and Transportation Solutions principally in the United States, mainly across the Southern, Northeastern, Mid-Atlantic and Rocky Mountain states, California and Hawaii. It mainly banks on a business expansion strategy, solid project execution and the E-Infrastructure Solutions business prospect. The company has been navigating the ongoing supply chain and inflation challenges with growth in its E-Infrastructure Solutions (its largest segment), E-Infrastructure and Building Solutions. Focus on the execution of strategic objectives also bodes well.

The company currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for STRL’s 2023 earnings has increased 1.4% to $3.50 per share in the past 30 days. The company beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 19.29%.

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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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