Markets

5 Stocks to Buy on Impressive Relative Price Strength

Investors generally gauge a stock's potential return 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 the 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.

At the same time, it is imperative that you determine whether or not a stock has relevant upside potential when considering stocks with significant relative price strength. Identifying stocks delivering better performances than the S&P 500 over a period of 1 to 3 months at the least and having fundamentals indicating that it has room to move higher is the best way to go about this.

Finally, it is important that we determine 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, 4 weeks and 1 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 26 years - can get through.

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 out the low priced stocks, while a high trading volume would imply adequate liquidity.

VGM Scoreless 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 5 of the 8 stocks that made it through the screen:

Dave & Buster's Entertainment Inc.PLAY : Headquartered in Dallas, TX, Dave & Buster's Entertainment owns and operates dining and entertainment venues in North America. The company carries a Zacks Rank #1 and a VGM score of "A". It also has an excellent earnings surprise history, having beaten estimates in each of the last four quarters at an average rate of 104.8%.

Sanmina Corp.SANM : A provider of electronics contract manufacturing services, San Jose, CA based Sanmina boasts a Zacks Rank #1 and a VGM score of "A". Over the past 30 days, the Zacks Consensus Estimate for 2016 and 2017 experienced an increase of 3.5% and 8%, respectively, to $2.34 and $2.69 per share.

Tallgrass Energy GP L.P.TEGP : The partnership is a contributor of crude transportation services in the Wyoming and the adjoining areas of U.S. Sporting a Zacks Rank #1 and a VGM score of "A", Leawood, KS headquartered Tallgrass Energy's expected EPS growth rate for 3 to 5 years currently stands at 24%.

Qorvo Inc.QRVO : Headquartered in Greensboro, NC, Qorvo is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. Sporting a Zacks Rank #1 and carrying a VGM score of "B", the company surprised earnings to the upside in each of the last three quarters.

Copart Inc.CPRT : Based in Dallas, TX, Copart provides online auction and a wide range of remarketing services to process and sell salvage and clean title vehicles. The FY 2016 Zacks Consensus Estimate for this Zacks Rank #1 stock is $2.07, representing 23.85% earnings per share growth over FY 2015. Next fiscal year's average forecast is $2.31, representing 11.6% growth. Copart carries 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.

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QORVO INC (QRVO): Free Stock Analysis Report

DAVE&BUSTRS ENT (PLAY): Free Stock Analysis Report

SANMINA CORP (SANM): Free Stock Analysis Report

COPART INC (CPRT): Free Stock Analysis Report

TALLGRASS ENRGY (TEGP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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