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If you're interested in momentum ideas, the following screen might offer a good starting point.

To create this list of stocks we started with a universe of stocks in rally mode - trading above their 20-day, 50-day and 200-day moving averages.

We refined the list by focusing on those companies that appear undervalued by price relative to their current year earnings per share (EPS) estimates. In evaluating this metric we worked off of the theoretical assumption that P/E equals a constant, K. It follows that there should be a linear relationship between price changes and Earnings per share changes. Thus,

If P/E = K
Then P = (K)(E)

If there is a mismatch between growth rates in projected earnings per share values and price, a mis-pricing may have occurred, presenting an opportunity to value investors.

(Note: There is no reason to be believe there is indeed a constant value for P/E - the simplifying assumption is made to construct a screen. The goal here is to give you a starting point for your own analysis.)

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



These rallying stocks appear to be undervalued relative to earnings trends - do you agree? Leave your comments below.

1. AutoZone Inc. (AZO): Operates as a specialty retailer and distributor of automotive replacement parts and accessories. The stock is currently trading 1.03% above the SMA20, 6.74% above its SMA50, and 15.0% above its SMA200. The EPS estimate for the company's current year increased from 22 to 22.52 over the last 30 days, an increase of 2.36%. This increase came during a time when the stock price changed by 1.26% (from 313.83 to 317.79 over the last 30 days).

2. Electronic Arts Inc. (ERTS): Develops, markets, publishes and distributes game software and content for video game consoles, personal computers, mobile phones, tablets and electronic readers, hand held game players and the Internet. The stock is currently trading 3.73% above the SMA20, 6.54% above its SMA50, and 9.98% above its SMA200. The EPS estimate for the company's current year increased from 0.88 to 0.9 over the last 30 days, an increase of 2.27%. This increase came during a time when the stock price changed by 0.96% (from 21.89 to 22.1 over the last 30 days).

3. Kinetic Concepts Inc. (KCI):
Produces surgical healing and hospital patient-mobility equipment, including a tissue-repair therapy used in hospitals. The stock is currently trading 1.17% above the SMA20, 1.09% above its SMA50, and 17.78% above its SMA200. The EPS estimate for the company's current year increased from 4.99 to 5.04 over the last 30 days, an increase of 1.%. This increase came during a time when the stock price changed by 0.45% (from 66.59 to 66.89 over the last 30 days).

4. Pinnacle West Capital Corporation (PNW): Provides retail and wholesale electric services primarily in the State of Arizona. The stock is currently trading 0.28% above the SMA20, 1.66% above its SMA50, and 2.21% above its SMA200. The EPS estimate for the company's current year increased from 2.83 to 2.84 over the last 30 days, an increase of 0.35%. This increase came during a time when the stock price changed by 0.09% (from 42.91 to 42.95 over the last 30 days).

5. Arch Capital Group Ltd. (ACGL):
Provides insurance and reinsurance products worldwide. The stock is currently trading 0.87% above the SMA20, 0.13% above its SMA50, and 2.30% above its SMA200. The EPS estimate for the company's current year increased from 1.93 to 1.95 over the last 30 days, an increase of 1.04%. This increase came during a time when the stock price changed by 1.01% (from 32.7 to 33.03 over the last 30 days).

6. Westar Energy, Inc. (WR): Engages in the generation, transmission and distribution of electricity. The stock is currently trading 1.21% above the SMA20, 3.85% above its SMA50, and 3.36% above its SMA200. The EPS estimate for the company's current year increased from 1.71 to 1.76 over the last 30 days, an increase of 2.92%. This increase came during a time when the stock price changed by 2.81% (from 25.63 to 26.35 over the last 30 days).

7. PNM Resources, Inc. (PNM):
Operates in energy and energy-related businesses in the United States. The stock is currently trading 7.11% above the SMA20, 11.08% above its SMA50, and 12.34% above its SMA200. The EPS estimate for the company's current year increased from 0.88 to 1.01 over the last 30 days, an increase of 14.77%. This increase came during a time when the stock price changed by 13.86% (from 14.57 to 16.59 over the last 30 days).

8. Knight Capital Group Inc. (KCG): Provides access to the capital markets across multiple asset classes to buy-and sell-side firms and corporations, as well as offers capital markets services to corporate issuers and private companies primarily in the United States. The stock is currently trading 0.53% above the SMA20, 3.94% above its SMA50, and 0.57% above its SMA200. The EPS estimate for the company's current year increased from 0.98 to 1.1 over the last 30 days, an increase of 12.24%. This increase came during a time when the stock price changed by 4.6% (from 12.18 to 12.74 over the last 30 days).

*EPS data from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 8 Rallying Stocks That Still Need To Price In Earnings Growth