This story originally appeared on Zacks
Momentum investors typically don’t tune the market or “buy low and sell high”. In other words, they avoid betting on cheap stocks and waiting long periods for them to recover. Instead, they believe that “buy high and sell higher” is the way to make a lot more money in less time.
Who doesn’t like to bet on fast-moving trend stocks? But determining the right entry point is not easy. These stocks often lose momentum when their valuation outperforms their future growth potential. In such a situation, investors find themselves crammed with expensive stocks that have no or no benefits. As such, going all-in at momentum can sometimes be risky.
A safer approach might be to invest in bargain stocks with the latest price momentum. While the Zacks Momentum Style Score (part of the Zacks Style Scores system) helps identify stocks with high momentum by looking closely at a stock’s price or earnings trend, our Quick Momentum for a Bargain screen is handy to quickly move stocks that are still attractively valued.
Beacon Roofing Supply (BECN) is one of the many great candidates that made it through the screen. While there are numerous reasons this stock is a good choice, here are the main ones:
Investors’ growing interest in a stock is reflected in its recent price surge. A price change of 9% in the last four weeks positions the roofing distributor’s inventory well in this regard.
While any stock can surge in price for a short period of time, it takes a real momentum player to generate positive returns over a longer period of time. BECN also fulfills this criterion, as the stock has gained 8.2% over the past 12 weeks.
Additionally, the momentum is fast-moving for BECN as the stock currently has a beta of 1.99. This indicates that the stock is moving 99% higher than the market in either direction.
Given this performance, it’s not surprising that BECN has a momentum score of B, which indicates that this is the right time to get into the stock to take advantage of the momentum with the highest chance of success.
In addition to a favorable momentum score, an upward trend in earnings estimate revisions helped BECN achieve a Zacks rank of # 2 (Buy). Our research shows that the momentum effect is quite strong on Zack’s Rank # 1 and # 2 stocks. That’s because more and more investors get interested in a stock when analysts raise their earnings estimates, which helps the price race to keep up. You can view the full list of current Zacks Rank # 1 (Strong Buy) stocks here >>>>
Most importantly, despite its fast momentum capabilities, BECN is trading at a reasonable valuation. In terms of price-to-sales ratio, which is believed to be one of the top valuation metrics, the stock looks pretty cheap right now. BECN is currently trading at 0.59 times its sales. In other words, investors only pay 59 cents for every dollar of sales.
So BECN seems to have a lot of room to run, and at a fast pace too.
In addition to BECN, there are several other stocks that are currently scrolling through our Quick Momentum For a Bargain screen. You can consider investing in them and looking for the latest stocks that match these criteria.
This isn’t the only screen that could help you find your next profitable stock pick. Based on your personal investment style, you can choose from over 45 Zacks Premium Screens strategically designed to beat the market.
Remember, however, that the key to a successful stock selection strategy is to ensure that it has had profitable results in the past. You can do this very easily with the help of the Zacks Research Wizard. Not only does the program give you a chance to test the effectiveness of your strategy, it also includes some of our most successful stock selection strategies.
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Beacon Roofing Supply, Inc. (BECN): Free Inventory Analysis Report
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