New Analyst Coverage Puts Spotlight on These 5 Stocks

Analysts do not randomly add a stock to their coverage. New coverage on a stock is usually the result of a huge investor focus on it or its promising prospects.

Points.com Inc. PCOM, Nova Ltd. NVMI, Standard Motor Products, Inc. SMP, Universal Technical Institute, Inc. UTI and CONSOL Energy Inc. CEIX are some stocks that have seen new analyst coverage lately. These, therefore, are expected to attract investor attention.

Interestingly, stocks typically see an incremental upward price movement with new analyst coverage compared to what they witness with the continuation of existing analyst coverage. Of course, the price movement depends on the recommendations from the new analysts. Positive recommendations — Buy and Strong Buy — lead to a significant positive incremental price reaction than Strong Sell, Sell or Hold recommendations.

Moreover, if an analyst gives a new recommendation on a company that has limited or no analyst coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.

However, one should preferably look for the average change in broker recommendation rather than a single recommendation change. Then again, an upgrade, an initiation or even increased coverage is equally important.

Keeping this mind, it’s a good strategy to focus on the number of analyst recommendations that have increased over the last few weeks.

Screening Criteria

Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago (this will shortlist stocks that have recent new coverage).

Average Broker Rating less than Average Broker Rating four weeks ago ('less than' means 'better than' four weeks ago).

Increased analyst coverage and improving average rating are the primary criteria of this strategy but one should also consider other relevant parameters to make it foolproof.

Here are the other screening parameters:

Price greater than or equal to $5 (as a stock below $5 will not likely create significant interest for most investors).

Average Daily Volume greater than or equal to 100,000 shares (if volume isn’t enough, it will not attract individual investors).

Here are five out of the 17 stocks that passed the screen:

Points.com: Based in Toronto, Canada, this company provides technology solutions to the loyalty industry.

PCOM currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 63.1% year to date (YTD) against the industry’s 42.8% drop. Earnings estimates for 2022 have increased to 26 cents per share from 23 cents over the past 30 days.

Nova: Based in Rehovot, Israel, Nova is a provider of metrology solutions for advanced process control used in semiconductor manufacturing in Israel, Taiwan, the United States, China, Korea and internationally.

NVMI currently carries a Zacks Rank #1. The stock has lost 36.6% YTD compared with the industry’s 29.3% drop. Yet, earnings estimates for 2022 have increased 11.9% over the past 30 days to $4.69 per share. The estimated figure calls for a 21.8% increase from the year-ago period.

Standard Motor Products: Based in Long Island City, NY, this company manufactures and distributes replacement parts in the automotive aftermarket industry.

The SMP stock has plunged 15.1% YTD compared with the industry’s 13.7% decline. That said, earnings estimates for fiscal 2022 have increased 3.1% over the past 30 days to $4.68 per share. The estimated figure calls for a 5.2% increase from the year-ago period. SMP currently carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Universal Technical Institute: This Phoenix, AZ-based postsecondary education company provides transportation and technical training programs in the United States.

UTI currently carries a Zacks Rank #3 (Hold). The stock has lost 3.7% YTD compared with the industry’s 9.2% drop. Earnings estimates for fiscal 2022 have increased 68.6% over the past 30 days to 59 cents per share. The estimated figure for fiscal 2022 calls for a 118.5% increase from the year-ago period.

CONSOL Energy: This Canonsburg, PA-based energy company produces and exports bituminous coal in the United States.

CEIX currently carries a Zacks Rank #3. The stock has climbed 141.6% YTD, outperforming the industry’s 62.6% increase. Earnings estimates for 2022 calls for a 360.2% increase from the year-ago period.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Universal Technical Institute Inc (UTI) : Free Stock Analysis Report
 
Standard Motor Products, Inc. (SMP) : Free Stock Analysis Report
 
Points.com Inc. (PCOM) : Free Stock Analysis Report
 
Nova Ltd. (NVMI) : Free Stock Analysis Report
 
Consol Energy Inc. (CEIX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research