Dynamic investing revolves around the idea of following the recent trend of a two-way action. In the “long” context, investors “will buy at a high price, but hope to sell even higher”. With this methodology, it is essential to take advantage of trends in the price of a stock; once a stock establishes a price, it is more than likely to continue moving in that direction. The goal is that once a stock moves towards 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 difficult to define. There is a lot of debate around which metrics to focus on and shoddy metrics for future performance. The Zacks Momentum Style Score, which is part of the Zacks Style Scores, helps us solve this problem.
Below we take a look First Cash Financial Services (FCFS – Free report) , a company that currently holds a Momentum Style Score of B. We also talk about price changes and revisions to earnings estimates, two of the main aspects of the Momentum Style Score.
It’s also important to note that Style Scores work as a supplement to the Zacks Leaderboard, our stock rating system that has an impressive track record of outperformance. First Cash Financial Services currently has a Zacks rank of # 2 (Buy). Our research shows that stocks ranked Zacks Rank # 1 (Strong Buy) and # 2 (Buy) and Style A or B scores outperform the market over the following month period.
You can see the current list of Zacks # 1 ranking actions here >>>
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In order to see if FCFS is a promising start-up pick, let’s take a look at some elements of the Momentum style to see if this pawnshop holds up.
A good dynamic benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and whether buyers or sellers currently have the edge. It is also useful to compare a stock to its industry, as this can help investors identify the best companies in a particular field.
For FCFS, stocks are up 0.89% over the past week, while Zacks Financial’s consumer lending sector is up 0.09% over the same time frame. Stocks are also doing very well over a longer time frame, as the 3.49% monthly price change compares favorably with the industry’s 0.18% performance.
While any stock can see its price rise, it takes a real winner to consistently outperform the market. Shares of First Cash Financial Services rose 13.65% in the last quarter and 49.06% last year. In contrast, the S&P 500 moved only 3.39% and 34.28%, respectively.
Investors should also take note of the 20-day average FCFS trading volume. Volume is useful in many ways, and the 20-day average sets a good price / volume benchmark; a rising stock with above average volume is usually a bullish sign, while a falling stock with above average volume is usually bearish. Currently, FCFS has an average of 162,029 shares in the last 20 days.
The Zacks Momentum style score encompasses many things, including estimate revisions and the price movement of a stock. Investors should note that earnings estimates are also important to the Zacks rankings, and a nice track here may hold promise. We recently noticed this with FCFS.
Over the past two months, 3 profit estimates have increased compared to none less for the entire year. These revisions helped increase the consensus estimate of the FCFS from $ 3.04 to $ 3.29 in the past 60 days. For the next fiscal year, 2 estimates have increased while there has been no downward revision during the same period.
Considering all of these, it’s no surprise that FCFS is a # 2 (Buy) stock with a Momentum Score of B. If you’re looking for a new pick that should increase in the short term, be sure to keep First Cash Financial Services on your shortlist.