UK markets close in 49 minutes
  • FTSE 100

    7,515.36
    -20.70 (-0.27%)
     
  • FTSE 250

    20,107.81
    -228.60 (-1.12%)
     
  • AIM

    926.33
    -5.21 (-0.56%)
     
  • GBP/EUR

    1.1851
    -0.0038 (-0.32%)
     
  • GBP/USD

    1.2064
    -0.0030 (-0.25%)
     
  • BTC-GBP

    19,418.66
    -377.06 (-1.90%)
     
  • CMC Crypto 200

    554.90
    -17.91 (-3.13%)
     
  • S&P 500

    4,269.49
    -35.71 (-0.83%)
     
  • DOW

    33,952.73
    -199.28 (-0.58%)
     
  • CRUDE OIL

    88.77
    +2.24 (+2.59%)
     
  • GOLD FUTURES

    1,783.00
    -6.70 (-0.37%)
     
  • NIKKEI 225

    29,222.77
    +353.86 (+1.23%)
     
  • HANG SENG

    19,922.45
    +91.93 (+0.46%)
     
  • DAX

    13,668.68
    -241.44 (-1.74%)
     
  • CAC 40

    6,532.98
    -59.60 (-0.90%)
     

Why Paradox Interactive AB (publ) is a market favourite

  • Oops!
    Something went wrong.
    Please try again later.
·2-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Some shares have withstood recent economic shockwaves better than others - but is Paradox Interactive AB (publ) (STO:PDX) one of them?

To understand why different shares respond to chaos in different ways, it pays to look at their strengths. In bull markets, investors gravitate to speculative, unproven growth stocks as a means of achieving the best returns. But these stocks usually collapse first in a crisis.

By contrast, high quality shares often get overlooked in bull markets. But it's these stocks that are often better at keeping their momentum and recovering quickest from periods of volatility.

Shares in Paradox Interactive AB (publ) are currently trading at SEK187.5 but a question in the minds of many investors is how the price will respond to the Covid-19 uncertainty.

The answer is that there are some positive signs. The stock scores well against some important financial and technical measures and has exposure to two influential drivers of investment returns: high quality and strong momentum.

So why are these two factors important and where are the clues hidden?

GET MORE DATA-DRIVEN INSIGHTS INTO STO:PDX »

High quality

When it comes to stock analysis, company quality tends to show up in high profitability and strong industry-leading margins. These kinds of firms are stable, growing and often have accelerating sales and earnings. They also have strong and improving financial histories with no signs of accountancy or bankruptcy risk.

One of the quality metrics for Paradox Interactive AB (publ) is its 5-year Return on Capital Employed, which is 35.3%. Good, double-digit ROCEs are a pointer to companies that can grow very profitably.

Strong momentum

Positive momentum trends show up in share prices and earnings growth. You can find the clues in stocks that are trading close to their 52 week high prices and outperforming the market. They’ll often be beating broker estimates and getting forecast upgrades and recommendation changes.

This is true at Paradox Interactive AB (publ), where the share price has seen a 13.1% return relative to the market over the past 12 months. Market volatility and economic uncertainty can be a major drag on momentum, but previously strong stocks can be quick to recover when confidence returns.

In summary, good quality and momentum are pointers to some of the best stocks on the strongest uptrends. This combination of factors can be a clue to finding shares that can deliver solid investment profits over many years.

In good times, these shares can become expensive to buy. But in volatile markets, there may be chances to buy them at cheaper prices.

What does this mean for potential investors?

Finding good quality stocks with strong momentum behind them is a strategy used by some of the world's most successful investors. But be warned: these factors don't guarantee future returns and we've identified some areas of concern with Paradox Interactive AB (publ) that you can find out about here.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting