The year 2021 is in its tail end with just a few days of trading left. While a highly successful 2021 has propelled the U.S. equity markets to historic levels, the resurgence of coronavirus either in the form of Delta or Omicron has been creating intermittent hurdles. Therefore, as we head into the New Year, it is time to focus on good investment opportunities.
Investors generally gauge a stock’s potential returns by examining earnings growth and valuation multiples. At the same time, it’s essential to measure the performance of such a stock relative to its industry or peers, or an appropriate benchmark.
If you see that a stock is underperforming on fundamental factors, it would be prudent to move on and find a better alternative. However, those outperforming their respective sectors in terms of price should be selected because they stand a better chance of providing considerable returns.
Then again, it is imperative that you determine whether or not an investment has relevant upside potential when considering stocks with significant relative price strength. Stocks delivering better than the S&P 500 for 1 to 3 months at least and having solid fundamentals indicate room for growth and are the best ways to go about this strategy.
Finally, it is crucial to find out whether analysts are optimistic about the upcoming earnings of these companies. In order to do this, we have added positive estimate revisions for the current quarter’s (Q1) earnings to our screen. When a stock undergoes an upward revision, it leads to additional price gains.
Screening Parameters
Relative % Price change – 12 weeks greater than 0
Relative % Price change – 4 weeks greater than 0
Relative % Price change – 1 week greater than 0
(We have considered those stocks that have been outperforming the S&P 500 over the last 12 weeks, four weeks and one week.)
% Change (Q1) Est. over 4 Weeks greater than 0:
Positive current-quarter estimate revisions over the last four weeks.
Zacks Rank equal to 1:
Only Zacks Rank #1 (Strong Buy) stocks — that have returned more than 26% annually over the last 26 years and surpassed the S&P 500 in 23 of the last 26 years — can get through. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Current Price greater than or equal to $5 and Average 20-day Volume greater than or equal to 50,000:
A minimum price of $5 is a good standard to screen low-priced stocks, while a high trading volume would imply adequate liquidity.
VGM Score
less than or equal to B:
Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.
Here are the six stocks that made it through the screen:
Photronics, Inc.
PLAB
: Founded in 1969 and headquartered in Brookfield, CT, Photronics is a leading supplier of photomasks used in the manufacturing of semiconductors. Photronics has a VGM Score of A.
Notably, PLAB beat the Zacks Consensus Estimate for earnings in two of the last four quarters. Photronics has a trailing four-quarter earnings surprise of roughly 12.6%, on average. The company’s shares have rocketed around 73.1% in a year.
Builders FirstSource, Inc.
BLDR
: The company is a manufacturer and supplier of structural and associated building products primarily for new residential construction in the U.S. Builders FirstSource has a VGM Score of A. Over the past 60 days, Dallas, TX-based BLDR saw the Zacks Consensus Estimate for 2022 move up 50.2%.
Builders FirstSource beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 71.5%. Valued at around $16 billion, BLDR has rallied around 101.1% in a year.
Earthstone Energy, Inc.
ESTE
: Earthstone Energy is an oil and gas producer with a strong footprint in the Midland basin of west Texas and the Eagle Ford trend of south Texas. The 2022 Zacks Consensus Estimate for The Woodlands, TX-based firm indicates 112.2% earnings per share growth over 2021. ESTE has a VGM Score of A.
Earthstone Energy beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 93.2%, on average. ESTE shares have gained around 118.4% in a year.
Preferred Apartment Communities, Inc.
APTS
: Preferred Apartment Communities is a real estate investment trust, which owns relatively new apartment communities primarily in the states of Florida, Georgia, and Texas. This Atlanta, GA-headquartered company’s expected EPS growth rate for three to five years is currently 7%, which compares favorably with the industry’s growth rate of 6.4%. APTS has a VGM Score of B.
Preferred Apartment Communities beat the Zacks Consensus Estimate for earnings in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 36%, on average. APTS shares have gained around 137.1% in a year.
DLH Holdings Corp.
DLHC
:
This Atlanta, GA-based firm is a provider of technology-enabled business process outsourcing services for the federal government’s health and human services initiatives. DLH Holdings has a VGM Score of A.
DLH has a projected earnings growth rate of 54.3% for fiscal 2022. The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 14.1%. DLHC shares have gained around 104.3% in a year.
CF Industries Holdings, Inc.
CF
:
CF Industries is one of the largest manufacturers and distributors of nitrogenous fertilizer and other nitrogen products globally. The 2022 Zacks Consensus Estimate for this Deerfield, IL-based firm indicates 245.6% earnings per share growth over 2021. CF has a VGM Score of B.
Notably, CF Industries beat the Zacks Consensus Estimate for earnings in two of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 97.8%, on average. ESTE shares have gained around 118.4% in a year.
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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
.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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