At the time of designing their portfolio of stocks, investors solely aim at raking in the bucks, irrespective of the surrounding conditions. However, the task seems onerous as picking the perfect bets from a plenty of options in the market is never easy. Choice of improper stocks can adversely impact his/her returns, thereby ruining the very objective of investing the hard-earned money in the highly unpredictable stock market.
Brokers to the Rescue
To combat the above uncertainty, investors more often than not rely on the guidance provided by brokers who are deemed experts equipped with thorough knowledge on the field. Brokers, irrespective of their types (sell-side, buy-side or independent), do an in-depth research on the stocks covered by them.
To that end, they attend company conference calls, interview management personnel and minutely study the company’s publicly-available documents among other things. Brokers revise their earnings estimates for the concerned stock after carefully examining the pros and cons of an event.
In view of such well-assorted information at their disposal, it is in the best interest of investors to be guided by brokers’ discretion and the direction of their estimate revisions. Naturally, their stock-related actions (upgrade or downgrade) serve as an invaluable factor as far as fixing the target price of a stock (s) is concerned.
Top Line to be Considered as Well
While we discussed the bottom line in detail, the top line (revenue portion) cannot be ignored. Actually, according to many market watchers, a revenue beat is more creditable for a company than a mere earnings outperformance, especially in an environment of revenue weakness due to macroeconomic headwinds like lackluster demand for travel (which will hurt travel-focused companies). To address the top-line concerns, we included in our screen the price/sales ratio, which serves as a strong complementary valuation metric.
# (Up- Down Rating)/ Total (4 weeks) =Top #75: This gives the list of top 75 companies that have witnessed net upgrades over the last four weeks.
% change in Q (1) est. (4 weeks) = Top #10: This gives the top 10 stocks that have witnessed earnings estimate revisions over the past four weeks for the upcoming quarter.
To ensure that the strategy is a winning one, covering all bases, we added the following screening parameters:
Price-to-Sales = Bot%10: The lower the ratio, the better. Companies meeting this criterion are in the bottom 10% of our universe of more than 7,700 stocks with respect to this ratio.
Price greater than 5: A stock trading below $5 will not likely create a significant interest for most investors.
Average Daily Volume greater than 100,000 shares over the last 20 trading days: Volume has to be substantial to ensure that these are easily traded.
Market value ($ mil) = Top #3000: This gives us stocks that are the top 3000 if one judges by market capitalization.
Com/ADR/Canadian= Com: This takes out the ADR and Canadian stocks.
Here are five of the 10 stocks that made it through the screen:
Avis Budget Group CAR carries a Zacks Rank #2 (Buy), currently, and is based in Parsippany, NJ. The company operates as a leading vehicle rental operator in North America, Europe and Australasia with average rental fleet of nearly 650,000 vehicles. The Zacks Consensus Estimate for 2021 earnings has been raised 22.7% in the past 30 days.
Chicago-based Century Aluminum Company CENX is engaged in the production of primary aluminum in the United Sates and Iceland. This presently Zacks #3 Ranked company delivered a positive earnings surprise in three of the trailing four quarters, lagging estimates on one occasion.
Diebold Nixdorf DBD is a provider of connected commerce solutions to financial institutions. This currently Zacks #2 Ranked Ohio-based company provides automatic teller machines, financial and point-of-sale services. The Zacks Consensus Estimate for 2021 earnings has been revised 23.6% upward over the past 60 days.
Headquartered in Duluth, GA, Asbury Automotive Group ABG is among the leading automotive retailers in the domestic market. This presently Zacks Rank #1 (Strong Buy) stock’s earnings are expected to grow 22.6% for 2021. You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots BIG, through its wholly owned subsidiaries, is a discount retailer operating in the United States. This currently Zacks #1 Ranked stock delivered a positive earnings surprise in three of the trailing four quarters, missing the mark on one occasion.
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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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Avis Budget Group, Inc. (CAR): Free Stock Analysis Report
Big Lots, Inc. (BIG): Free Stock Analysis Report
Diebold Nixdorf, Incorporated (DBD): Free Stock Analysis Report
Asbury Automotive Group, Inc. (ABG): Free Stock Analysis Report
Century Aluminum Company (CENX): 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.