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Forget Bargains, Play 5 Stocks with Rising P/E Ratios, Instead
Stocks with low P/E are always investors’ favorites as the ratio indicates undervaluation. This ratio is obtained by dividing a stock’s current market price by its historical or estimated earnings. It measures how much an investor needs to shell out per dollar of earnings.
So, the golden rule is — the lower the P/E of a stock, the higher its value for its investors. This is because value investors believe that a stock's current market price is not reflective of its historical/future earnings and therefore chances of outperformance are higher.
Naturally, there are very few investors who pay attention to stocks with an increasing P/E. But this often-overlooked trend can prove worthwhile in finding great stocks. Let’s dig a little deeper.
How Can Rising P/E Be Helpful?
Investors should note that stock prices move in tandem with earnings performance. If earnings come in stronger, the price of a stock soars. Solid quarterly earnings and guidance, in turn, boost the earnings forecast, leading to stronger demand for the stock and an uptrend in its price.
So, if the price is rising steadily, it means that investors are assured of the stock’s fundamental strength, expect some strong positives out of it as well as solid and faster earnings growth. Moreover, studies have revealed that stocks have seen their P/E ratios jump over 100% from their breakout point in the cycle. So, if you can pick stocks early in their breakout cycle, you can end up seeing considerable gains.
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
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Zacks.com featured highlights include: SunOpta, Citi Trends, Organogenesis, Tapestry and Venus Concept
For Immediate Release
Chicago, IL – September 3, 2021 – Stocks in this week’s article are SunOpta Inc. (STKL - Free Report) , Citi Trends Inc. (CTRN - Free Report) , Organogenesis Holdings Inc. (ORGO - Free Report) , Tapestry Inc. (TPR - Free Report) and Venus Concept Inc. (VERO - Free Report) .
Forget Bargains, Play 5 Stocks with Rising P/E Ratios, Instead
Stocks with low P/E are always investors’ favorites as the ratio indicates undervaluation. This ratio is obtained by dividing a stock’s current market price by its historical or estimated earnings. It measures how much an investor needs to shell out per dollar of earnings.
So, the golden rule is — the lower the P/E of a stock, the higher its value for its investors. This is because value investors believe that a stock's current market price is not reflective of its historical/future earnings and therefore chances of outperformance are higher.
Naturally, there are very few investors who pay attention to stocks with an increasing P/E. But this often-overlooked trend can prove worthwhile in finding great stocks. Let’s dig a little deeper.
How Can Rising P/E Be Helpful?
Investors should note that stock prices move in tandem with earnings performance. If earnings come in stronger, the price of a stock soars. Solid quarterly earnings and guidance, in turn, boost the earnings forecast, leading to stronger demand for the stock and an uptrend in its price.
So, if the price is rising steadily, it means that investors are assured of the stock’s fundamental strength, expect some strong positives out of it as well as solid and faster earnings growth. Moreover, studies have revealed that stocks have seen their P/E ratios jump over 100% from their breakout point in the cycle. So, if you can pick stocks early in their breakout cycle, you can end up seeing considerable gains.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1790650/forget-bargains-play-5-stocks-with-rising-pe-instead
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Company: Zacks.com
Phone: 312-265-9268
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Visit: www.Zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.