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3 Stocks Trading Near 52-Week High With More Upside Potential
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Investors generally consider a 52-week high a good criterion for determining 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 speculation is 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 Pilgrim's Pride Corporation (PPC - Free Report) , Xerox (XRX - Free Report) and Applied Industrial Technologies (AIT - Free Report) are expected to maintain their 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 times, stocks that hit 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 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
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) 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 three picks of the eight stocks that made it through the screen:
Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. The company offers its services in the United States, Mexico, France, the Netherlands, Puerto Rico and Mexico through a number of distributors, retailers and food service operators.
The company is witnessing growth in the Retail and Foodservice business in the Prepared Foods segment along with enhanced operations in Big Bird. Focus on key customers in the foodservice sector has yielded a substantial pipeline of promotional initiatives with leading retailers and food service providers. Pilgrim's Pride is on track with its strategic growth efforts, such as facility expansions and technology integration, which are likely to boost operational efficiency. Apart from this, Pilgrim's Pride has been steadily augmenting marketing support for its brands as they expand and enter new regions.
The Zacks Consensus Estimate for PPC’s 2024 earnings has remained steady at $2.97 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 252.84%.
Xerox Holdings is engaged in the document management solutions business. The company’s post-sale-driven model yields substantial recurring revenues, supporting robust cash flows and fueling strategic investments and market expansion. The acquisition of Advanced UK has enhanced vertical integration and strengthened its UK presence. XRX’s "Project Own It" initiative is boosting the firm’s productivity, efficiency and cost reduction.
Last week, Xerox revealed its plan to shift operations in Peru and Ecuador to Productive Business Solutions (PBS), a longstanding partner of the company. From a financial perspective, by delegating its operational responsibilities, Xerox will likely be able to lower operational expenses and enhance profit margins. The move may be part of Xerox’s bid to sustain profitability in a competitive technology sector, where firms are increasingly focused on refining their cost structures.
The Zacks Consensus Estimate for XRX’s 2024 earnings has remained steady at $2.27 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 64.8%.
Applied Industrial Technologies is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies.
Applied Industrial is poised to benefit from an improving product line and value-added services. Strength across the food and beverage, lumber and wood, mining and refining end markets sparks optimism. Growth in larger national accounts and fluid power aftermarket sales and benefits from sales force effectiveness initiatives are aiding the Service Center Based Distribution segment. Focus on pricing and cross-selling actions, and growth initiatives augur well for Applied Industrial.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has moved north by 0.7% to $9.49 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.42%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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
3 Stocks Trading Near 52-Week High With More Upside Potential
Investors generally consider a 52-week high a good criterion for determining 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 speculation is 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 Pilgrim's Pride Corporation (PPC - Free Report) , Xerox (XRX - Free Report) and Applied Industrial Technologies (AIT - Free Report) are expected to maintain their 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 times, stocks that hit 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 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
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) 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 three picks of the eight stocks that made it through the screen:
Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. The company offers its services in the United States, Mexico, France, the Netherlands, Puerto Rico and Mexico through a number of distributors, retailers and food service operators.
The company is witnessing growth in the Retail and Foodservice business in the Prepared Foods segment along with enhanced operations in Big Bird. Focus on key customers in the foodservice sector has yielded a substantial pipeline of promotional initiatives with leading retailers and food service providers. Pilgrim's Pride is on track with its strategic growth efforts, such as facility expansions and technology integration, which are likely to boost operational efficiency. Apart from this, Pilgrim's Pride has been steadily augmenting marketing support for its brands as they expand and enter new regions.
The Zacks Consensus Estimate for PPC’s 2024 earnings has remained steady at $2.97 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 252.84%.
Xerox Holdings is engaged in the document management solutions business. The company’s post-sale-driven model yields substantial recurring revenues, supporting robust cash flows and fueling strategic investments and market expansion. The acquisition of Advanced UK has enhanced vertical integration and strengthened its UK presence. XRX’s "Project Own It" initiative is boosting the firm’s productivity, efficiency and cost reduction.
Last week, Xerox revealed its plan to shift operations in Peru and Ecuador to Productive Business Solutions (PBS), a longstanding partner of the company. From a financial perspective, by delegating its operational responsibilities, Xerox will likely be able to lower operational expenses and enhance profit margins. The move may be part of Xerox’s bid to sustain profitability in a competitive technology sector, where firms are increasingly focused on refining their cost structures.
The Zacks Consensus Estimate for XRX’s 2024 earnings has remained steady at $2.27 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 64.8%.
Applied Industrial Technologies is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies.
Applied Industrial is poised to benefit from an improving product line and value-added services. Strength across the food and beverage, lumber and wood, mining and refining end markets sparks optimism. Growth in larger national accounts and fluid power aftermarket sales and benefits from sales force effectiveness initiatives are aiding the Service Center Based Distribution segment. Focus on pricing and cross-selling actions, and growth initiatives augur well for Applied Industrial.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has moved north by 0.7% to $9.49 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.42%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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/.