Markets

Here's Why Momentum Investors Will Love Echo Global Logistics (ECHO)

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Echo Global Logistics (ECHO), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Echo Global Logistics currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here >>>

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for ECHO that show why this provider of supply-chain management services shows promise as a solid momentum pick.

A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For ECHO, shares are up 8.96% over the past week while the Zacks Transportation - Services industry is flat over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 16.24% compares favorably with the industry's 3.66% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Echo Global Logistics have increased 54.93% over the past quarter, and have gained 17.38% in the last year. In comparison, the S&P 500 has only moved 12.95% and 8.39%, respectively.

Investors should also pay attention to ECHO's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. ECHO is currently averaging 179,216 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with ECHO.

Over the past two months, 6 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost ECHO's consensus estimate, increasing from $0.78 to $0.87 in the past 60 days. Looking at the next fiscal year, 6 estimates have moved upwards while there have been no downward revisions in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that ECHO is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Echo Global Logistics on your short list.


Click to get this free report

Echo Global Logistics, Inc. (ECHO): Free Stock Analysis Report

To read this article on Zacks.com click here.

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

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More