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Investors who target stocks displaying relative strength find themselves in favorable market trends where buyers are in control.
For those unaware, relative strength investing focuses on stocks that have performed well compared to the market as a whole or a relevant benchmark.
And over the last month, several stocks – Caterpillar (CAT - Free Report) , Domino’s Pizza (DPZ - Free Report) , and Arista Networks (ANET - Free Report) – have all displayed relative strength, up more than 10% and handily outperforming the general market. For those interested in riding momentum, let’s take a closer look at each.
Caterpillar
Caterpillar shares got a nice boost following its recent quarterly print, with the company exceeding the Zacks Consensus EPS Estimate by 23% and reporting sales 5% expectations. Earnings saw an impressive 75% improvement from the year-ago quarter, whereas revenue climbed 20%.
As shown below, the company’s revenue has seen a notable acceleration post-pandemic.
Image Source: Zacks Investment Research
Following the better-than-expected results, the company has enjoyed positive earnings estimate revisions across all timeframes, with the stock sporting the highly-coveted Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
In addition, CAT shares are cheap given the company’s growth trajectory, with the current 14.9X forward earnings multiple (F1) sitting nicely beneath the 15.8X five-year median and highs of 21.4X in 2022. The company is expected to post 38% earnings growth in its current fiscal year on 12% higher revenues.
Image Source: Zacks Investment Research
Domino’s Pizza
Similar to CAT, analysts have become bullish on Domino’s Pizza’s outlook across the board, helping land the stock into a Zacks Rank #1 (Strong Buy). The company is expected to witness solid earnings growth in its current year, with the $13.73 per share estimate reflecting an improvement of 10% Y/Y.
Image Source: Zacks Investment Research
Income-focused investors will undoubtedly appreciate DPZ’s shareholder-friendly nature; DPZ shares currently yield 1.2% annually, with the payout growing by nearly 20% annualized over the last five years.
Image Source: Zacks Investment Research
And perhaps to the surprise of some, DPZ shares have been consistent market outperformers, boasting a sizable 21% annualized return over the last decade vs. the S&P 500’s 13.4%.
Image Source: Zacks Investment Research
Arista Networks
Analysts have shown optimism surrounding Arista Networks’ earnings outlook, with the company enjoying positive revisions across the board. The revisions trend has been particularly notable for its current fiscal year, with the $6.14 Zacks Consensus EPS Estimate up more than 30% over the last year.
Image Source: Zacks Investment Research
It’s hard to dismiss the company’s growth trajectory, with earnings forecasted to soar 34% on 30% higher revenues in its current year. The growth expectations carry over into FY24, with earnings and revenue forecasted to see improvements of 8.4% and 9%, respectively.
The company’s top line growth has been impressive, as illustrated in the chart below.
Image Source: Zacks Investment Research
Bottom Line
By targeting stocks displaying relative strength, investors can insert themselves in favorable trends where buyers are in control.
And when you add in the Zacks Rank, which focuses on earnings estimate revisions, the strategy becomes even more potent.
All three stocks above – Caterpillar (CAT - Free Report) , Domino’s Pizza (DPZ - Free Report) , and Arista Networks (ANET - Free Report) – have all displayed relative strength over the last month.
In addition, all three sport an improved earnings outlook, providing the fuel needed for shares to continue climbing.
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3 Buy-Rated Stocks Delivering Outsized Returns
Investors who target stocks displaying relative strength find themselves in favorable market trends where buyers are in control.
For those unaware, relative strength investing focuses on stocks that have performed well compared to the market as a whole or a relevant benchmark.
And over the last month, several stocks – Caterpillar (CAT - Free Report) , Domino’s Pizza (DPZ - Free Report) , and Arista Networks (ANET - Free Report) – have all displayed relative strength, up more than 10% and handily outperforming the general market. For those interested in riding momentum, let’s take a closer look at each.
Caterpillar
Caterpillar shares got a nice boost following its recent quarterly print, with the company exceeding the Zacks Consensus EPS Estimate by 23% and reporting sales 5% expectations. Earnings saw an impressive 75% improvement from the year-ago quarter, whereas revenue climbed 20%.
As shown below, the company’s revenue has seen a notable acceleration post-pandemic.
Image Source: Zacks Investment Research
Following the better-than-expected results, the company has enjoyed positive earnings estimate revisions across all timeframes, with the stock sporting the highly-coveted Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
In addition, CAT shares are cheap given the company’s growth trajectory, with the current 14.9X forward earnings multiple (F1) sitting nicely beneath the 15.8X five-year median and highs of 21.4X in 2022. The company is expected to post 38% earnings growth in its current fiscal year on 12% higher revenues.
Image Source: Zacks Investment Research
Domino’s Pizza
Similar to CAT, analysts have become bullish on Domino’s Pizza’s outlook across the board, helping land the stock into a Zacks Rank #1 (Strong Buy). The company is expected to witness solid earnings growth in its current year, with the $13.73 per share estimate reflecting an improvement of 10% Y/Y.
Image Source: Zacks Investment Research
Income-focused investors will undoubtedly appreciate DPZ’s shareholder-friendly nature; DPZ shares currently yield 1.2% annually, with the payout growing by nearly 20% annualized over the last five years.
Image Source: Zacks Investment Research
And perhaps to the surprise of some, DPZ shares have been consistent market outperformers, boasting a sizable 21% annualized return over the last decade vs. the S&P 500’s 13.4%.
Image Source: Zacks Investment Research
Arista Networks
Analysts have shown optimism surrounding Arista Networks’ earnings outlook, with the company enjoying positive revisions across the board. The revisions trend has been particularly notable for its current fiscal year, with the $6.14 Zacks Consensus EPS Estimate up more than 30% over the last year.
Image Source: Zacks Investment Research
It’s hard to dismiss the company’s growth trajectory, with earnings forecasted to soar 34% on 30% higher revenues in its current year. The growth expectations carry over into FY24, with earnings and revenue forecasted to see improvements of 8.4% and 9%, respectively.
The company’s top line growth has been impressive, as illustrated in the chart below.
Image Source: Zacks Investment Research
Bottom Line
By targeting stocks displaying relative strength, investors can insert themselves in favorable trends where buyers are in control.
And when you add in the Zacks Rank, which focuses on earnings estimate revisions, the strategy becomes even more potent.
All three stocks above – Caterpillar (CAT - Free Report) , Domino’s Pizza (DPZ - Free Report) , and Arista Networks (ANET - Free Report) – have all displayed relative strength over the last month.
In addition, all three sport an improved earnings outlook, providing the fuel needed for shares to continue climbing.