Investors generally gauge a stock’s potential returns 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.
Screening Parameters 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. 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. VGM Score less than or equal to B:
Here are the four stocks that made it through the screen:
CNX Midstream Partners LP CNXM: CNX Midstream Partners is a natural gas midstream company that owns and operates gathering and other assets in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. The 2019 Zacks Consensus Estimate for this Canonsburg, PA-based company is $2.03, representing some 7.4% earnings per unit growth over 2018. Next year’s average forecast is $2.27 pointing to another 12% growth. CNX Midstream Partners has a VGM Score of A. Smart Sand, Inc. SND: Smart Sand, headquartered in The Woodlands, TX, is a provider of Northern White raw frac sand – used to enhance hydrocarbon recovery rates – to the hydraulic fracturing market. The firm has a VGM Score of A and a good earnings surprise history having surpassed estimates in three of the last four quarters. NRG Energy, Inc. NRG: NRG Energy is engaged in the production, sale and delivery of energy and energy products and services to residential, industrial as well as commercial consumers in major competitive power markets in the United States. Sporting a VGM Score of A, this Princeton, NJ-headquartered company’s expected EPS growth rate for three to five years currently stands at 36.3%, comparing favorably with the industry's growth rate of 6.6%. BRP Inc. ( DOOO Quick Quote DOOO - Free Report) : BRP is a leading player in the powersports vehicles and propulsion systems industry. The FY 2020 Zacks Consensus Estimate for this Canada-based company is $2.79, representing some 17.2% earnings per share growth over FY19. Next fiscal year’s average forecast is $3.05 pointing to another 9% growth. BRP 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 .