For Immediate Release
Chicago, IL – February 8, 2018 - Stocks in this week’s article ESSA Pharma Inc. (EPIX - Free Report) , Alarm.com Holdings Inc. (ALRM - Free Report) , The Trade Desk Inc. (TTD - Free Report) , ABM Industries Incorporated (ABM - Free Report) and Sunrun Inc. (RUN - Free Report) .
What Bargain Hunting? Bet on These Stocks with Rising P/E
Betting on bargain stocks that have a low price-to-earnings (P/E) ratio is an all-time favorite investing strategy. The perception is that the lower the P/E, the higher is the value of the stock. This conclusion is drawn on the simple logic that a stock’s current market price does not justify its higher earnings and therefore leaves room for upside.
But there is more to this whole P/E story. Because not only low P/E, stocks with a rising P/E can also fetch strong returns.
Rising P/E: An Useful Tool
Investors should note that stock prices move in tandem with earnings performance. If earnings come in stronger, the price of a stock shoots up. Solid quarterly earnings and the forward guidance boost forecasts for future earnings, leading to stronger demand for the stock and an uptrend in its price.
So, if the price is rising steadily, it means that investors are assured of the stock’s fundamental strength and expect some strong positives out of it. Suppose an investor wants to buy a stock with a P/E ratio of 30, it means that he is willing to shell out $30 for only $1 worth of earnings. This is because the investor expects earnings of the company to rise at a faster pace in the future on the back of strong fundamentals.
Also, studies have revealed that stocks have seen their P/E ratios jump over 100% from their breakout point in the cycle. So, if you can pick stocks early in their breakout cycle, you can end up seeing considerable gains.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/291619/what-bargain-hunting-bet-on-6-stocks-with-rising-pe
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