Do you like to invest with a stock's trading momentum? If so, here's a list you might be interested in.
We began by screening the technology sector for stocks with positive market sentiment, rallying above their 20-day, 50-day, and 200-day moving averages.
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good, DuPont focuses on companies with these positive characteristics: Increasing ROE along with;
•Decreasing leverage (i.e. decreasing Asset/Equity ratio)
•Improving asset use efficiency (i.e. increasing Sales/Assets ratio)
•Improving net profit margin (i.e. increasing Net income/Sales ratio)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Tool provided by Kapitall.
Do you think these stocks should continue to rally higher? Use this list as a starting point for your own analysis.
List sorted by percent rallying above 200-day moving average.
1. VeriSign, Inc. (VRSN): Provides Internet infrastructure services to various networks worldwide. Market cap at $6.74B, most recent closing price at $42.63. The stock is rallying 2.23% above its 20-day moving average (MA), 6.07% above its 50-day MA, and 17.66% above its 200-day MA. MRQ (most recent quarter) net profit margin at 33.06% vs. 22.46% y/y. MRQ sales/assets at 0.109 vs. 0.078 y/y. MRQ assets/equity at -26.395 vs. 4.274 y/y.
2. Acuity Brands, Inc. (AYI): Engages in the design, production, and distribution of lighting fixtures, lighting controls, and related products and services in North America and internationally. Market cap at $2.52B, most recent closing price at $59.47. The stock is rallying 1.88% above its 20-day moving average, 7.94% above its 50-day MA, and 9.48% above its 200-day MA. MRQ net profit margin at 6.89% vs. 5.91% y/y. MRQ sales/assets at 0.294 vs. 0.288 y/y. MRQ assets/equity at 2.023 vs. 2.042 y/y.
3. EMC Corporation (EMC): Develops, delivers, and supports the information and virtual infrastructure technologies and solutions. Market cap at $54.09B, most recent closing price at $25.76. The stock is rallying 5.85% above its 20-day moving average, 5.90% above its 50-day MA, and 2.46% above its 200-day MA. MRQ net profit margin at 11.52% vs. 10.36% y/y. MRQ sales/assets at 0.15 vs. 0.148 y/y. MRQ assets/equity at 1.695 vs. 1.779 y/y.
4. Qualcomm Inc. (QCOM): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $99.15B, most recent closing price at $58.21. The stock is rallying 4.76% above its 20-day moving average, 3.60% above its 50-day MA, and 0.40% above its 200-day MA. MRQ net profit margin at 45.11% vs. 25.81% y/y. MRQ sales/assets at 0.119 vs. 0.114 y/y. MRQ assets/equity at 1.303 vs. 1.355 y/y.
*Accounting data sourced from Google 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.