Investors generally consider a stock's 52-week high a good criterion for an entry or exit point. 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, not all stocks hitting a 52-week high are necessarily overpriced.

Investors might lose out on top gainers in an attempt to avoid the steep prices.

Stocks such as IPG Photonics (IPGP Quick QuoteIPGP - Free Report) , Dollar General (DG Quick QuoteDG - Free Report) , Ironwood Pharmaceuticals (IRWD Quick QuoteIRWD - Free Report) and Science Applications International (SAIC Quick QuoteSAIC - Free Report) are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to determine whether 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 this level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions, which encouraged investors to bet on these stocks, could keep them motivated if there are no tangible negatives. In other words, the momentum might continue.

Also, when a string of positive developments dominates the market, investors find their underreaction 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 and 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: This 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 four picks out of the 20 stocks that made it through the screen:

IPG Photonics positions itself favorably for 2026 growth through strategic expansion and product innovation. The November 2025 opening of its dedicated 14,000-square-foot Huntsville facility establishes IPG Defense as a distinct business unit, capitalizing on the rising demand for CROSSBOW laser defense systems in counter-UAS applications. This expansion into the defense sector diversifies revenue streams beyond traditional materials processing markets.

Meanwhile, January 2026 showcased breakthrough technologies at SPIE Photonics West, including an award-finalist 8-kilowatt compact single-mode laser with exceptional beam quality, advanced nanosecond cleaning systems, and high-power platforms reaching 60 kilowatts. These innovations demonstrate technological leadership across cleaning, welding, cutting, micro-machining and medical applications. The combination of defense market penetration and cutting-edge product development strengthens IPG's competitive positioning for accelerating adoption across multiple end markets.

This Zacks Rank #1 stock has returned 12.5% in the past six-month period. It has a trailing four-quarter earnings surprise of 89.09%, on average. The Zacks Consensus Estimate for IPGP’s 2026 earnings has moved north by 4.7% to $1.55 per share over the past 60 days.

Dollar General presents a compelling investment opportunity driven by robust operational momentum and strategic expansion initiatives. The retailer delivered strong third-quarter results with same-store sales growth of 2.5%, accompanied by matching traffic growth —demonstrating genuine customer engagement. Operating profit surged 31.5%, reflecting improved operational efficiency. The company raised its fiscal 2025 financial guidance and outlined an ambitious fiscal 2026 real estate expansion plan encompassing approximately 4,730 projects, including 450 new U.S. store openings, primarily targeting underserved rural communities. This footprint expansion, combined with 4,250 store remodels through Project Renovate and Project Elevate initiatives, positions Dollar General to capture incremental market share. The company's value proposition resonates strongly with price-conscious consumers navigating economic uncertainty, while its dividend declaration demonstrates commitment to shareholder returns alongside growth investments.

This Zacks Rank #1 stock has returned 32.4% in the past six-month period. It has a trailing four-quarter earnings surprise of 22.86%, on average. The Zacks Consensus Estimate for DG’s fiscal 2026 earnings has moved north by 5.7% to $7.08 per share over the past 60 days.

Ironwood Pharmaceuticals presents a compelling opportunity driven by strategic pricing optimization and pipeline advancement. The January 2026 LINZESS list price reduction eliminates inflationary rebate penalties, paradoxically driving higher net sales expectations of $1.125-$1.175 billion while supporting patient access. This enhanced margin profile powers projected adjusted EBITDA exceeding $300 million, establishing robust cash generation without dilutive financing needs. The company strengthened its balance sheet to over $200 million in cash while achieving debt covenant compliance.

Importantly, fourth-quarter 2025 FDA alignment on apraglutide's confirmatory Phase 3 trial design clears regulatory uncertainty, with initiation planned for first-half 2026. The ongoing strategic alternatives review further signals management's commitment to maximizing shareholder value. This dual-engine approach—optimizing the LINZESS franchise while self-funding apraglutide's blockbuster potential—positions Ironwood for sustained profitability and growth.

This Zacks Rank #1 stock has surged 521.5% in the past six-month period. It has a trailing four-quarter earnings surprise of 28.95%, on average. The Zacks Consensus Estimate for IRWD’s 2026 earnings has moved north by 65.2% to 76 cents per share over the past 60 days.

Science Applications International Corporation is positioned for growth through strategic organizational restructuring and significant contract wins. The consolidation of five business groups into three streamlined divisions, effective Jan. 31, 2026, aims to optimize operations and sharpen customer focus for sustainable value creation. The company secured a substantial $1.4 billion COBRA task order in November 2025 to accelerate multi-domain warfighting technologies across Combined Joint All-Domain Command and Control systems, demonstrating strong positioning in defense modernization.

December 2025 saw a $242 million Navy contract for undersea weapon facility operations and recognition as an IDC MarketScape Leader in AI services for both defense/intelligence and civilian government sectors. With a robust $23.8 billion backlog and a year-to-date book-to-bill ratio of 1.3, fundamental momentum supports continued operational strength.

This Zacks Rank #1 stock has lost 6% in the past six-month period. It has a trailing four-quarter earnings surprise of 26.05%, on average. The Zacks Consensus Estimate for SAIC’s fiscal 2026 earnings has moved north by 3.9% to $9.96 per share over the past 60 days.