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Relative Price Strength Makes These 5 Stocks Excellent Buys
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The year 2023 has witnessed an impressive rally on Wall Street, propelled by a consistent decline in inflation and a simultaneous moderation in both the scale and frequency of interest rate hikes by the Federal Reserve. Illustrating this trend, the S&P 500 has surged 20% year to date.
Complementing the diminishing inflation, the U.S. economy's fundamentals remain robust. With a staggering 5.1% growth in GDP during the third quarter of 2023 and resilient consumer spending, the economic landscape looks promising. Additionally, signals from the central bank suggest an approaching conclusion to the current rate hike cycle. The anticipation of lower market interest rates is expected to decrease the cost of funds, providing companies with opportunities to initiate projects and boost capital expenditure.
Against this positive backdrop, astute investors are concentrating on relative price performance, strategically identifying and investing in promising stocks to achieve accelerated returns.
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 five of the 12 stocks that made it through the screen:
Wingstop Inc. (WING - Free Report) : Based in Dallas, TX, the company is a prominent global player in the restaurant industry, specializing in chicken wings. Wingstop’s expected EPS growth rate for three to five years is currently 21.8%, which compares favorably with the industry's growth rate of 14.9%. The company has a VGM Score of B.
Notably, the 2023 Zacks Consensus Estimate for Wingstop indicates 29.7% year-over-year earnings per share growth. The company has a market capitalization of $7.3 billion. WING shares have gone up 55.3% in a year.
JAKKS Pacific (JAKK - Free Report) : JAKKS Pacific is a multi-brand company that has been designing and marketing a broad range of toys and consumer products since 1995. The 2023 Zacks Consensus Estimate for the Santa Monica, CA-based firm indicates 20.8% year-over-year earnings per share growth. JAKK has a VGM Score of A.
JAKKS Pacific beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 61.8%, on average. JAKK shares have surged 90.4% in a year.
Insight Enterprises (NSIT - Free Report) : It provides software solutions and related services to large corporations that enable digital transformation. The 2023 Zacks Consensus Estimate for this firm indicates 7.1% year-over-year earnings per share growth. Headquartered in Chandler, AZ, NSIT has a VGM Score of A.
Insight beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 4.1%, on average. NSIT shares have shot up 70.9% in a year.
G-III Apparel Group, Ltd. (GIII - Free Report) : Based in New York, the company is a leading designer, manufacturer and distributor of apparel and accessories. Over the past 60 days, G-III Apparel Group saw the Zacks Consensus Estimate for fiscal 2024 move up 15.9%. GIII has a VGM Score of A.
The Zacks Consensus Estimate for G-III Apparel Group’s fiscal 2024 earnings indicates 33% year-over-year growth. It has a trailing four-quarter earnings surprise of roughly 541.8%, on average. GIII shares have skyrocketed 137.8% in a year.
Journey Medical Corporation (DERM - Free Report) : Based in Scottsdale, AZ, Journey Medical is renowned for its strategic focus on dermatological conditions. Over the past 60 days, the company saw the Zacks Consensus Estimate for 2023 move up 87.5%. DERM has a VGM Score of A.
The 2023 Zacks Consensus Estimate for Journey Medical indicates 90.5% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 118.3%, on average. DERM shares have surged 268.4% 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.
Image: Bigstock
Relative Price Strength Makes These 5 Stocks Excellent Buys
The year 2023 has witnessed an impressive rally on Wall Street, propelled by a consistent decline in inflation and a simultaneous moderation in both the scale and frequency of interest rate hikes by the Federal Reserve. Illustrating this trend, the S&P 500 has surged 20% year to date.
Complementing the diminishing inflation, the U.S. economy's fundamentals remain robust. With a staggering 5.1% growth in GDP during the third quarter of 2023 and resilient consumer spending, the economic landscape looks promising. Additionally, signals from the central bank suggest an approaching conclusion to the current rate hike cycle. The anticipation of lower market interest rates is expected to decrease the cost of funds, providing companies with opportunities to initiate projects and boost capital expenditure.
Against this positive backdrop, astute investors are concentrating on relative price performance, strategically identifying and investing in promising stocks to achieve accelerated returns.
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 five of the 12 stocks that made it through the screen:
Wingstop Inc. (WING - Free Report) : Based in Dallas, TX, the company is a prominent global player in the restaurant industry, specializing in chicken wings. Wingstop’s expected EPS growth rate for three to five years is currently 21.8%, which compares favorably with the industry's growth rate of 14.9%. The company has a VGM Score of B.
Notably, the 2023 Zacks Consensus Estimate for Wingstop indicates 29.7% year-over-year earnings per share growth. The company has a market capitalization of $7.3 billion. WING shares have gone up 55.3% in a year.
JAKKS Pacific (JAKK - Free Report) : JAKKS Pacific is a multi-brand company that has been designing and marketing a broad range of toys and consumer products since 1995. The 2023 Zacks Consensus Estimate for the Santa Monica, CA-based firm indicates 20.8% year-over-year earnings per share growth. JAKK has a VGM Score of A.
JAKKS Pacific beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of 61.8%, on average. JAKK shares have surged 90.4% in a year.
Insight Enterprises (NSIT - Free Report) : It provides software solutions and related services to large corporations that enable digital transformation. The 2023 Zacks Consensus Estimate for this firm indicates 7.1% year-over-year earnings per share growth. Headquartered in Chandler, AZ, NSIT has a VGM Score of A.
Insight beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 4.1%, on average. NSIT shares have shot up 70.9% in a year.
G-III Apparel Group, Ltd. (GIII - Free Report) : Based in New York, the company is a leading designer, manufacturer and distributor of apparel and accessories. Over the past 60 days, G-III Apparel Group saw the Zacks Consensus Estimate for fiscal 2024 move up 15.9%. GIII has a VGM Score of A.
The Zacks Consensus Estimate for G-III Apparel Group’s fiscal 2024 earnings indicates 33% year-over-year growth. It has a trailing four-quarter earnings surprise of roughly 541.8%, on average. GIII shares have skyrocketed 137.8% in a year.
Journey Medical Corporation (DERM - Free Report) : Based in Scottsdale, AZ, Journey Medical is renowned for its strategic focus on dermatological conditions. Over the past 60 days, the company saw the Zacks Consensus Estimate for 2023 move up 87.5%. DERM has a VGM Score of A.
The 2023 Zacks Consensus Estimate for Journey Medical indicates 90.5% year-over-year earnings per share growth. It has a trailing four-quarter earnings surprise of roughly 118.3%, on average. DERM shares have surged 268.4% 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
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.