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5 Stocks Trading Near 52-Week High With Room to Rise Further

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Stocks hitting their 52-week high and delivering consistent performance offer attractive opportunities to investors while building a portfolio. This is because stocks near that level are perceived to be winners. However, stocks touching a new 52-week high 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 speculations are 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 Tenet Healthcare (THC - Free Report) , Sylvamo (SLVM - Free Report) , DaVita (DVA - Free Report) , Norwegian Cruise Line (NCLH - Free Report) and IAMGOLD (IAG - Free Report) are expected to maintain their momentum and keep scaling new highs. Extensive 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 strategy borrows from the basics of momentum investing. This technique 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.

In fact, overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay a 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 >= .8

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 0.11 implies that 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 >= 8

This parameter will help screen stocks that are trading at $8 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 five stocks of the 13 that made it through the screen:

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 expected 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 remained steady at $10.72 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%.

Sylvamo produces and markets uncoated freesheet for cut size, offset paper and pulp. Stronger order books and higher pulp and paper prices are likely to aid top-line growth in the near term. The company has initiated a cost-reduction program called Project Horizon, which is focused on streamlining its organization and cost structures in an effort to make a leaner, stronger company. 

SLVM is on track to realize savings of at least $110 million by the end of 2024. Around $80 million of the target will come from operational improvements in its mills and supply chains and the balance from the reduction in selling and administrative expenses. The company continues to lower its debt levels and maintains a strong financial position that enables it to invest in its business. It has a pipeline of more than $200 million of high-return capital projects, which will boost its earnings and cash flow profile.

Estimates for Sylvamo’s 2024 earnings have remained steady at $7.40 per share over the past 30 days. SLVM surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23.97%.

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 remained steady at $9.99 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%.

Norwegian Cruise Line Holdings, a Bermuda Limited company, is a leading cruise line operator. It owns and operates three brands — Oceania Cruises, Regent Seven Seas Cruises and Norwegian Cruise Line. NCLH is benefiting from strong demand, high pricing and increased booking volumes, leading to record advance ticket sales. Its focus on fleet expansion efforts and digital initiatives bodes well. These factors showcase that the company’s strategy is well-aligned with its growth goals and 2026 financial and sustainability targets. Given the substantial progress made so far and current demand expectations, the company raised its 2024 full-year guidance. 

The Zacks Consensus Estimate for NCLH’s 2024 earnings has remained steady at $1.56 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same once, the average surprise being 5.67%.

IAMGOLD is an international gold exploration and mining company based in Canada. IAG is poised for growth, supported by an upward trend in gold prices, the ongoing ramp-up at Côté Gold and the established portfolio of early-stage and advanced exploration projects within high-potential mining districts. 

IAG continues to invest in maximizing production and increasing the life of its existing mines, advancing development and exploration projects. IAMGOLD expects production from the Côté Gold mine in 2024 to be near the lower end of 130,000-175,000 ounces (on a 60.3% basis). IAG has the financing in place and is set to buy a 9.7% interest in Côté Gold on Nov. 30, 2024. This will take its stake in the project to 70%. 

The contribution from the mine to IAG’s production in 2024 is expected to be higher once this deal is completed. Significant operational projects planned for the next years include the Westwood ramp-up to safely access other mining areas that were affected by the seismic activity in 2020.

The Zacks Consensus Estimate for IAMGOLD’s 2024 earnings has moved north by 23.1% to 48 cents per share in the past 30 days. IAG surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 200%.

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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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