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 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 1 to 3 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 10 stocks that made it through the screen:
Lithia Motors Inc. (LAD - Free Report) : Lithia Motors, founded in 1946, is one of the leading automotive retailers of new and used vehicles, and related services in the U.S. Sporting a VGM Score of B, this Medford, OR-headquartered company’s expected EPS growth rate for three to five years currently stands at 19%, comparing favorably with the industry’s growth rate of 11%.
Toyota Motor Corporation (TM - Free Report) : Headquartered in Toyota City, Japan, Toyota is one of the leading automakers in the world in terms of sales and production. The company has a VGM Score of A and an excellent earnings surprise history. It has a 100% track of outperforming estimates over the last four quarters at an average rate of 28.3%.
Kraton Corporation (KRA - Free Report) : A worldwide producer of styrenic block copolymers (SBC) and other engineered polymers that are added to a wide range of applications to enhance their flexibility, resilience, and durability, Kraton, has a VGM Score of A. Over 30 days, the Houston, TX-based firm has seen the Zacks Consensus Estimate for 2017 and 2018 increase 18.2% and 5.4%, to $2.53 and $3.52 per share, respectively.
YY Inc. (YY - Free Report) : Headquartered in Guangzhou, China, YY is one of the country’s leading live streaming platforms, which facilitates its users to engage in real-time online group activities. The company has a VGM Score of A and an excellent earnings surprise history. It surpassed estimates in each of the last three quarters.
The Chemours Company (CC - Free Report) : Headquartered in Wilmington, DE, Chemours is a global chemical company specializing in the production of titanium dioxide, fluoroproducts and chemical solutions. The 2017 Zacks Consensus Estimate for this company is $3.63, representing some 255.4% earnings per share growth over 2016. Next year’s average forecast is $5.00, pointing to another 37.9% growth. Chemours 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.
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.
Zacks Restaurant Recommendations: Inaddition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »