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4 Stocks Trading Near 52-Week High With More Upside Potential
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Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculation is not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Pilgrim's Pride (PPC - Free Report) , Tenet Healthcare (THC - Free Report) , DaVita (DVA - Free Report) and Universal Health Services (UHS - Free Report) are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here, we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many times, stocks that hit a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our four picks out of the 14 stocks that made it through the screen:
Pilgrim's Pride is focusing on strengthening its Prepared Foods category. The category grew in the United States during the fourth quarter of 2019 on continued investments in R&D and sales as well as marketing of new product innovations. Also, the company has been increasing its product mix for the organic category, including No-Antibiotics-Ever products, to cater to customers' evolving tastes.
The company’s portfolio diversification strategies, including its focus on branded offerings and strategic key customer partnerships, play a crucial role in driving growth. Focus on key customers is a pathway for refining its portfolio and creating competitive advantages over its peers. The company's strategic investments in its U.S. and Mexican operations, including new facilities and expanded capacities, support growth. In addition to expansion, management is focused on cost-cutting measures, including optimizing operational processes and reducing grain input costs, which is driving profitability. These initiatives reinforce Pilgrim’s Pride’s long-term growth objectives and strengthen its market position.
The Zacks Consensus Estimate for PPC’s 2024 earnings has moved north by 12.7% to $4.79 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 27.27%.
Tenet Healthcare is a major investor-owned healthcare services company operating general hospitals and related facilities across multiple states, with key offices in California and Florida.
Tenet's revenue growth is fueled by increasing patient admissions, while its strategy of acquisitions and alliances aims to expand the scale of its business through inorganic growth. It has been undertaking divestitures to eliminate unprofitable businesses and focus on allocating capital to higher return-generating investments. Its performance in Ambulatory Care is driving the results.
Net operating revenues for the Ambulatory Care unit are likely to be between $4.325 billion and $4.475 billion in 2024. Tenet's financial performance is further enhanced by contractual rate increases in its Conifer joint venture. This combination of organic growth, strategic acquisitions, operational optimization and strong performance in key business units positions Tenet Healthcare for continued success in the healthcare services sector.
The Zacks Consensus Estimate for THC’s 2024 earnings has moved north by 20.6% to $10.7 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 58.48%.
DaVita is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease. The company operates kidney dialysis centers and provides related medical services, primarily in dialysis centers and in contracted hospitals across the United States.
Investors have high optimism about DaVita's patient-centric care model, which leverages its platform of kidney care services to maximize patient choice in terms of models and modalities of care. Value-based arrangements are becoming more and more common in the field of kidney health. Due to these arrangements, nephrologists, providers and transplant programs can collaborate to a much greater extent, which leads to a more comprehensive understanding of each patient's clinical needs. Management expects that this will result in early intervention and improved care coordination.
The Zacks Consensus Estimate for DVA’s 2024 earnings has moved north by 2.9% to $9.9 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 24.24%.
Universal Health Services owns and operates (through its subsidiaries) acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers.
Universal Health's Acute Care and Behavioral Health segments have been pivotal in driving top-line growth, fueled by expansions in licensed bed capacity. The company anticipates positive impacts on its Acute Care unit from Medicaid supplemental programs. Strategic buyouts have played a significant role in augmenting its growth trajectory by broadening its portfolio of facilities. It beat second-quarter earnings estimates on Acute Care strength. The company maintains a robust liquidity position, enabling it to pursue growth initiatives and distribute capital through buybacks and dividends. It has resorted to a constant dividend payout of 20 cents per share since 2019.
The Zacks Consensus Estimate for UHS’ 2024 earnings has moved north by 15% to $15.91 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.58%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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.
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.
Image: Bigstock
4 Stocks Trading Near 52-Week High With More Upside Potential
Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculation is not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Pilgrim's Pride (PPC - Free Report) , Tenet Healthcare (THC - Free Report) , DaVita (DVA - Free Report) and Universal Health Services (UHS - Free Report) are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here, we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many times, stocks that hit a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our four picks out of the 14 stocks that made it through the screen:
Pilgrim's Pride is focusing on strengthening its Prepared Foods category. The category grew in the United States during the fourth quarter of 2019 on continued investments in R&D and sales as well as marketing of new product innovations. Also, the company has been increasing its product mix for the organic category, including No-Antibiotics-Ever products, to cater to customers' evolving tastes.
The company’s portfolio diversification strategies, including its focus on branded offerings and strategic key customer partnerships, play a crucial role in driving growth. Focus on key customers is a pathway for refining its portfolio and creating competitive advantages over its peers. The company's strategic investments in its U.S. and Mexican operations, including new facilities and expanded capacities, support growth. In addition to expansion, management is focused on cost-cutting measures, including optimizing operational processes and reducing grain input costs, which is driving profitability. These initiatives reinforce Pilgrim’s Pride’s long-term growth objectives and strengthen its market position.
The Zacks Consensus Estimate for PPC’s 2024 earnings has moved north by 12.7% to $4.79 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 27.27%.
Tenet Healthcare is a major investor-owned healthcare services company operating general hospitals and related facilities across multiple states, with key offices in California and Florida.
Tenet's revenue growth is fueled by increasing patient admissions, while its strategy of acquisitions and alliances aims to expand the scale of its business through inorganic growth. It has been undertaking divestitures to eliminate unprofitable businesses and focus on allocating capital to higher return-generating investments. Its performance in Ambulatory Care is driving the results.
Net operating revenues for the Ambulatory Care unit are likely to be between $4.325 billion and $4.475 billion in 2024. Tenet's financial performance is further enhanced by contractual rate increases in its Conifer joint venture. This combination of organic growth, strategic acquisitions, operational optimization and strong performance in key business units positions Tenet Healthcare for continued success in the healthcare services sector.
The Zacks Consensus Estimate for THC’s 2024 earnings has moved north by 20.6% to $10.7 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 58.48%.
DaVita is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease. The company operates kidney dialysis centers and provides related medical services, primarily in dialysis centers and in contracted hospitals across the United States.
Investors have high optimism about DaVita's patient-centric care model, which leverages its platform of kidney care services to maximize patient choice in terms of models and modalities of care. Value-based arrangements are becoming more and more common in the field of kidney health. Due to these arrangements, nephrologists, providers and transplant programs can collaborate to a much greater extent, which leads to a more comprehensive understanding of each patient's clinical needs. Management expects that this will result in early intervention and improved care coordination.
The Zacks Consensus Estimate for DVA’s 2024 earnings has moved north by 2.9% to $9.9 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 24.24%.
Universal Health Services owns and operates (through its subsidiaries) acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers.
Universal Health's Acute Care and Behavioral Health segments have been pivotal in driving top-line growth, fueled by expansions in licensed bed capacity. The company anticipates positive impacts on its Acute Care unit from Medicaid supplemental programs. Strategic buyouts have played a significant role in augmenting its growth trajectory by broadening its portfolio of facilities. It beat second-quarter earnings estimates on Acute Care strength. The company maintains a robust liquidity position, enabling it to pursue growth initiatives and distribute capital through buybacks and dividends. It has resorted to a constant dividend payout of 20 cents per share since 2019.
The Zacks Consensus Estimate for UHS’ 2024 earnings has moved north by 15% to $15.91 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.58%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
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/.