Momentum investing is about the idea of following a stock’s recent trend in both directions. In the ‘long’ context, investors will essentially be “buying high, but hoping to sell even higher.” With this method, it is key to take advantage of trends in a stock price; once a stock has established a price, it is more than likely that it will continue to move that way. The goal is that when a stock goes down a fixed path, it will lead to timely and profitable trades.
While many investors like to look for momentum in stocks, it can be very difficult to define. There is a lot of debate around which measurements are best to focus on and which indicators of poor quality of future performance. Zacks Momentum Style Score, part of Zacks style results, helps solve this problem for us.
Below we look at Estee Lauder (EL – Free report) , a company that currently has a Momentum Style Score at B. We are also talking about changes in price changes and earnings estimates, two of the most important aspects of the Momentum Style Score.
It’s also important to note that Style Scores complements Zacks Rank, our stock rating system that has an impressive track record for outperformance. Estee Lauder currently has a Zacks rank of # 1 (strong buy). Our research shows that stocks rated Zacks Rank # 1 (Strong Buy) and # 2 (Buy) and Style Scores of A or B will surpass the market during the following month.
You can see the current list of Zacks # 1 ranks stocks here >>>
Set to beat the market?
Let’s discuss some of the components of the Momentum Style Score for EL that show why this company of beauty products is showing promise as a solid momentum.
Looking at a stock’s short-term price activity is a great way to measure if it has momentum, as this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It is also helpful to compare a security with its industry as this can help investors find the best companies in a particular area.
For EL, shares rose 15.28% over the past week, while the Zacks Cosmetics industry rose 1.35% over the same period. Equities also look good from a longer time frame, as the monthly price change of 16.09% is also compared to the industry’s 6.63% performance.
While any stock can see a rise in price, it requires a real winner to consistently surpass the market. Shares in Estee Lauder have risen 19.98% over the last quarter and have risen 35.07% over the past year. On the other hand, the S&P 500 has moved only 11.64% and 18.02%, respectively.
Investors should also be aware of EL’s average trading volume of 20 days. Volume is a useful element in many ways, and the 20-day average creates a good price-to-volume baseline; a rising stock with above average is generally a bullish sign, whereas a falling stock above above average is typically bearish. Right now, EL has averaged 1,523,136 shares in the last 20 days.
Zacks Momentum Style Score also takes into account trends in estimated revisions in addition to price changes. Keep in mind that estimated revision trends remain the core of Zacks Rank. A good path here can help show promise, and we have recently seen that with EL.
Over the past two months, 12 earnings estimates moved higher compared to no lower for the full year. These revisions helped increase EL’s consensus estimate and rose from $ 5.22 to $ 5.94 in the last 60 days. Looking at the next financial year, 10 estimates have moved upwards, while there have been no downward revisions in the same time period.
Taking all these elements into account, it should come as no surprise that EL is a # 1 (Strong Buy) stock with a Momentum Score of B. If you have been looking for a new election that will increase in the near future , make sure to keep Estee Lauder on your short list.
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