Investors generally gauge a stock’s potential return by examining earnings growth and valuation multiples. At the same time, it’s important to measure the performance of such a stock relative to its industry or peers, or the appropriate benchmark.
If you see that a stock is underperforming on the fundamental factors, then it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance to provide considerable returns.
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 over a period of one to three months at the least and having solid fundamentals indicate room for growth, and are the best ways to go about this strategy.
Finally, it is important to find out whether analysts are optimistic about the upcoming earnings results 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.
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, 4 weeks and 1 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 21 stocks that made it through the screen:
The Liberty Media Group (LMCA - Free Report) : Headquartered in Englewood, CO, The Liberty Media Group owns interests in a broad range of businesses, including media, communications and entertainment. The company has a VGM score of “A” and an excellent earnings surprise history. It surpassed/met estimates in three of the last four quarters at an average rate of 72.13%.
Seagate Technology plc( (STX - Free Report) : The second-largest manufacturer of hard disk drives (HDDs) in the U.S., Dublin, Ireland-based Seagate Technology has a VGM score of “A”. Over the past 30 days, the Zacks Consensus Estimate for fiscal 2017 and 2018 increased 7% and 5%, respectively, to $3.75 per share each.
Best Buy Co. Inc. (BBY - Free Report) : Headquartered in Richfield, MN, Best Buy is a multinational specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services. The company has a VGM score of “A” and surprised earnings to the upside in each of the last four quarters.
McDermott International Inc. (MDR - Free Report) : Incorporated in 1959, McDermott International is an engineering and construction company, solely focused on the offshore oil and gas business. Sporting a VGM score of “A”, this Houston, TX headquartered company’s expected EPS growth rate for 3 to 5 years currently stands at 15.50% –– comparing favorably with the industry growth rate of negative1.30%.
Gibraltar Industries Inc. (ROCK - Free Report) : Based in Buffalo, NY, Gibraltar Industries manufactures and distributes products – ranging from ventilation and expanded metal to mail storage solutions and rain dispersion products and solutions – to the industrial and buildings market. The 2016 Zacks Consensus Estimate for this company is $1.58, representing 45% earnings per share growth over 2015. The next year’s average forecast is $1.81, pointing to 14% growth. Gibraltar Industries has a VGM score of “B”.
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.
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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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