Momentum investing is all about the idea of following a stock’s recent trend, which can be in either direction. In the ‘long’ context, investors will essentially be “buying high, but hoping to sell even higher.” And for investors following this methodology, taking advantage of trends in a stock’s price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Helen of Troy (HELE), a company that currently holds a Momentum Style Score of A. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.
It’s also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Helen of Troy currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Set to Beat the Market?
In order to see if HELE is a promising momentum pick, let’s examine some Momentum Style elements to see if this personal and household products company holds up.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For HELE, shares are up 7.02% over the past week while the Zacks Cosmetics industry is up 1.27% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 12.18% compares favorably with the industry’s 1.7% performance as well.
While any stock can see its price increase, it takes a real winner to consistently beat the market. That is why looking at longer term price metrics — such as performance over the past three months or year — can be useful as well. Over the past quarter, shares of Helen of Troy have risen 13.29%, and are up 43.16% in the last year. On the other hand, the S&P 500 has only moved 8.21% and 36.04%, respectively.
Investors should also take note of HELE’s average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, HELE is averaging 141,728 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with HELE.
Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions helped boost HELE’s consensus estimate, increasing from $8.67 to $8.69 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.
Bottom Line
Given these factors, it shouldn’t be surprising that HELE is a #2 (Buy) stock and boasts a Momentum Score of A. If you’re looking for a fresh pick that’s set to soar in the near-term, make sure to keep Helen of Troy on your short list.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment