Whether a stock has the potential to offer considerable returns is determined primarily by its earnings and valuation ratios. Simultaneously, it is important to check whether its price performance exceeds its peers or the industry average.
On 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 that you have 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 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, 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 (Strong Buy) 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 the five of the 18 stocks that made it through the screen:
Jones Lang LaSalle Incorporated (JLL - Free Report) : Jones Lang LaSalle, founded in 1999, is a leading full-service real estate firm that provides corporate, financial and investment management services to corporations and other real estate owners, users, and investors worldwide. Carrying a VGM Score of B, this Chicago, IL-headquartered company’s expected EPS growth rate for three to five years currently stands at 11%, comparing favorably with the industry's growth rate of 10.6%.
Rogers Corporation (ROG - Free Report) : Headquartered in Chandler, AZ, Rogers is a producer of advanced specialty polymer composite materials and components that are adopted by leading-edge applications around the world. The company has a VGM Score of B and an excellent earnings surprise history. It has a 100% track of outperforming estimates over the last four quarters at an average rate of 19.5%.
PBF Energy Inc. (PBF - Free Report) : A leading independent refiner, transporter and marketer of petroleum products with a combined crude processing capacity of roughly 900 thousand barrels per day, PBF Energy has a VGM Score of A. Over 30 days, the Parsippany, NJ-based firm has seen the Zacks Consensus Estimate for 2017 and 2018 increase 37.1% and 19.9%, to $1.59 and $2.83 per share, respectively.
Westlake Chemical Corporation (WLK - Free Report) : Headquartered in Houston, TX, Westlake is a producer and supplier of basic chemicals, vinyls, polymers, and fabricated products. The company, which operates in two business segments, Olefins and Vinyls, has a VGM Score of B and an enviable earnings surprise history. It surpassed estimates in each of the last four quarters.
DXC Technology Company (DXC - Free Report) : Headquartered in Tysons, VA, DXC Technology is the world’s second-largest end-to-end IT services provider offering a broad array of professional services to clients in the global, commercial and government markets. The fiscal 2018 Zacks Consensus Estimate for this company's earnings is $7.27 per share, representing some 134.5% growth over fiscal 2017. Next year’s average forecast is $8.55, pointing to further 17.6% growth. DXC Technology has a VGM Score of A.
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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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