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 15 stocks that made it through the screen:
BioTelemetry, Inc. (BEAT - Free Report) : BioTelemetry, headquartered in Malvern, PA, is one of the leading providers of realtime ambulatory outpatient management solutions for mobile cardiac monitoring. The firm 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 55.6%.
Ericsson (ERIC - Free Report) : Ericsson is a leading provider of communication networks, telecom services and support solutions. The 2018 Zacks Consensus Estimate for this Stockholm, Sweden-based company is 28 cents, representing some 159.6% earnings per share growth over 2017. Next year’s average forecast is 41 cents pointing to another 47.3% growth. Ericsson has a VGM Score of B.
Intel Corporation (INTC - Free Report) : The world’s largest manufacturer of semiconductor products, Intel has a VGM Score of A. Over 30 days, the Santa Clara, CA-based company has seen the Zacks Consensus Estimate for 2018 and 2019 increase 9.7% and 7.7%, to $4.53 and $4.59 per share, respectively.
United States Cellular Corporation (USM - Free Report) : Founded in 1983 and headquartered in Chicago, IL, United States Cellular is one of the largest wireless telecom operators in the United States in terms of customer count. The company has a VGM Score of B and an enviable earnings surprise history having surpassed estimates in each of the last four quarters.
Cigna Corporation (CI - Free Report) : Cigna, along with its subsidiaries, constitutes one of the largest investor-owned health service organizations in the United States. Sporting a VGM Score of B, this Bloomfield, CT-headquartered company’s expected EPS growth rate for three to five years currently stands at 12.2%, comparing favorably with the industry's growth rate of 8.2%.
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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.