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.
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 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 five of the 26 stocks that made it through the screen:
Lithia Motors, Inc. LAD: Lithia Motors is one of the leading automotive retailers of new and used vehicles, and related services in the United States. The 2019 Zacks Consensus Estimate for this Medford, OR-based company is $11.60, representing 16.2% earnings per share growth over 2018. Next year’s average forecast is $13.11 pointing to another 13.1% growth. Lithia Motors has a VGM Score of A.
DexCom, Inc. DXCM: A medical device company focused on the design, development and commercialization of continuous glucose monitoring systems (CGM), DexCom has a VGM Score of B. Over 30 days, the San Diego, CA-based company has seen the Zacks Consensus Estimate for 2019 and 2020 increase 50% and 29.6%, to $1.41 and $1.75 per share, respectively.
PulteGroup, Inc. PHM: PulteGroup, headquartered in Atlanta, GA, engages in homebuilding and financial services businesses, primarily in the United States. The firm has a VGM Score of B and an excellent earnings surprise history having surpassed estimates in each of the last four quarters, the average being 10.5%.
Cirrus Logic, Inc. CRUS: Cirrus Logic is a fabless semiconductor supplier, which develops, manufactures and markets analog, mixed-signal, and audio DSP integrated circuits (ICs). Sporting a VGM Score of B, this Austin, TX-headquartered company’s expected EPS growth rate for three to five years currently stands at 15%, comparing favorably with the industry's growth rate of 14.4%.
WellCare Health Plans, Inc. WCG: Founded in 1985 and headquartered in Tampa, FL, WellCare Health Plans offers government-sponsored managed care services. The company has a VGM Score of A and an impeccable earnings surprise history having surpassed estimates in each of the last four quarters, the average being 17.3%.
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.
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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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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
Cirrus Logic, Inc. (CRUS) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
WellCare Health Plans, Inc. (WCG) : Free Stock Analysis Report
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