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4 Relative Price Strength Stocks With Strong Return Potential
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Over the past few days, the decline in Producer Price Index (PPI) and Consumer Price Index (CPI) numbers has clearly demonstrated that the economy is cooling. However, in absolute term, inflation remains well above the Fed’s 2% target. With market participants adopting a cautious approach in view of the positive and the negative factors, U.S. stock markets have witnessed rangebound trading in the past two weeks.
Moreover, continued worries over the regional banking system and the fallout from the forced UBS-Credit Suisse tie-up means that volatile trading in U.S. stocks is expected to continue for some time. We believe that more visibility regarding the future market direction will only be available after first-quarter 2023 earnings results, along with management guidance and business outlook.
Till then, investors who might want to stay exposed to the equity setup should 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
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures a winning option on your hands.
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.
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:
Primerica, Inc. (PRI - Free Report) : This is a life insurance company. The 2023 Zacks Consensus Estimate for Duluth, GA-based PRI indicates 29.6% year-over-year earnings per share growth. Primerica has a VGM Score of B.
Over the past 60 days, Primerica saw the Zacks Consensus Estimate for 2023 move up 12.4%. It beat the Zacks Consensus Estimate for earnings in each of the last two quarters. PRI shares have moved up 32.7% in a year.
Riley Exploration Permian, Inc. (REPX - Free Report) : The company churns out oil and gas, whose productive capacity is based on the horizontal development of the San Andres formation on the Northwest Shelf of the Permian Basin. Over the past 60 days, this Oklahoma City-based firm saw the Zacks Consensus Estimate for 2023 move up 37.2%. REPX has a VGM Score of B.
Riley Exploration Permian beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 12.7%, on average. REPX shares have increased 73.1% in a year.
Omnicom Group Inc. (OMC - Free Report) : It is one of the largest advertising, marketing and corporate communications companies in the world. The 2023 Zacks Consensus Estimate for this New York-based OMC indicates 3.8% year-over-year earnings per share growth. Omnicom has a VGM Score of B.
Over the past 30 days, Omnicom saw the Zacks Consensus Estimate for 2023 move up 7.3%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. OMC shares have gained 20% in a year.
Lamb Weston Holdings, Inc. (LW - Free Report) : Based in Eagle, ID, the company is a leading global manufacturer, marketer and distributor of value-added frozen potato products. Lamb Weston’s expected EPS growth rate for three to five years is currently 42.7%, which compares favorably with the industry's growth rate of 10.6%. LW has a VGM Score of B.
Notably, Lamb Weston beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 47.6%, on average. LW shares have gone up 59.3% in a year.
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.
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4 Relative Price Strength Stocks With Strong Return Potential
Over the past few days, the decline in Producer Price Index (PPI) and Consumer Price Index (CPI) numbers has clearly demonstrated that the economy is cooling. However, in absolute term, inflation remains well above the Fed’s 2% target. With market participants adopting a cautious approach in view of the positive and the negative factors, U.S. stock markets have witnessed rangebound trading in the past two weeks.
Moreover, continued worries over the regional banking system and the fallout from the forced UBS-Credit Suisse tie-up means that volatile trading in U.S. stocks is expected to continue for some time. We believe that more visibility regarding the future market direction will only be available after first-quarter 2023 earnings results, along with management guidance and business outlook.
Till then, investors who might want to stay exposed to the equity setup should 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
Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is essential to check whether its price performance exceeds its peers or the industry average.
Upon such comparison, if we find that a stock is unable to match up to wider sectoral growth despite having impressive earnings momentum or valuation multiples, it may be better to avoid it.
However, those outperforming their respective industries or benchmarks should be included in your portfolio since they have a higher chance of securing significant returns. Picking a stock that outperforms its peers ensures a winning option on your hands.
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.
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:
Primerica, Inc. (PRI - Free Report) : This is a life insurance company. The 2023 Zacks Consensus Estimate for Duluth, GA-based PRI indicates 29.6% year-over-year earnings per share growth. Primerica has a VGM Score of B.
Over the past 60 days, Primerica saw the Zacks Consensus Estimate for 2023 move up 12.4%. It beat the Zacks Consensus Estimate for earnings in each of the last two quarters. PRI shares have moved up 32.7% in a year.
Riley Exploration Permian, Inc. (REPX - Free Report) : The company churns out oil and gas, whose productive capacity is based on the horizontal development of the San Andres formation on the Northwest Shelf of the Permian Basin. Over the past 60 days, this Oklahoma City-based firm saw the Zacks Consensus Estimate for 2023 move up 37.2%. REPX has a VGM Score of B.
Riley Exploration Permian beat the Zacks Consensus Estimate for earnings in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 12.7%, on average. REPX shares have increased 73.1% in a year.
Omnicom Group Inc. (OMC - Free Report) : It is one of the largest advertising, marketing and corporate communications companies in the world. The 2023 Zacks Consensus Estimate for this New York-based OMC indicates 3.8% year-over-year earnings per share growth. Omnicom has a VGM Score of B.
Over the past 30 days, Omnicom saw the Zacks Consensus Estimate for 2023 move up 7.3%. It beat the Zacks Consensus Estimate for earnings in each of the last four quarters. OMC shares have gained 20% in a year.
Lamb Weston Holdings, Inc. (LW - Free Report) : Based in Eagle, ID, the company is a leading global manufacturer, marketer and distributor of value-added frozen potato products. Lamb Weston’s expected EPS growth rate for three to five years is currently 42.7%, which compares favorably with the industry's growth rate of 10.6%. LW has a VGM Score of B.
Notably, Lamb Weston beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 47.6%, on average. LW shares have gone up 59.3% in a year.
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.