MOmentum investing involves following a stock’s recent trend, which can go either way. In the “long” context, investors will “buy high, but expect to sell even higher”. And for investors following this methodology, taking advantage of a stock’s price trends is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a security enters 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 metrics to focus on and which are poor quality indicators of future performance. The Zacks Momentum-style score, which is part of the Zacks Style Sheet Musichelp solve this problem for us.
Below we examine Playa Hotels and Resorts (PLYA)which currently has a Momentum Style Score of B. We also discuss some of the key drivers of the Momentum Style Score, such as price movement and earnings estimate revisions.
It’s also important to note that Style Scores work alongside Zacks Rank, our stock rating system which has an impressive track record of outperformance. Playa Hotels & Resorts currently has a Zacks rating 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 outperform the market over the next month.
You can see the current list of Zacks #1 Stock Rank Here >>>
Ready to beat the market?
Let’s discuss some of the components of the Momentum Style Score for PLYA that show why this developer and operator of all-inclusive resorts holds promise as a solid dynamic pick.
Looking at a stock’s short-term price activity is a great way to gauge whether it has momentum, as it can reflect both current interest in a stock and whether buyers or sellers have the upper hand right now. It is also useful to compare a stock to its industry; it can show investors the best companies in a particular area.
For PLYA, shares rose 8.38% over the past week, while the hotel and motel industry Zacks rose 0.46% over the same period. Stocks also look pretty good over a longer time frame, as the monthly price change of 8.39% also compares favorably to the industry’s performance of 7.67%.
While any stock can experience a price spike, it takes a real winner to consistently outperform the market. Shares of Playa Hotels & Resorts rose 3.13% in the last quarter and gained 17.55% in the last year. By comparison, the S&P 500 only moved -5.72% and -3.32%, respectively.
Investors should also take note of PLYA’s 20-day average trading volume. Volume is a useful element 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 on above average volume is usually bearish. Currently, PLYA is showing an average of 2,085,782 shares over the past 20 days.
The Zacks Momentum Style Score encompasses many elements, including revisions to estimates and the movement of a stock’s price. Investors should note that earnings estimates are also important for the Zacks ranking, and a nice path here can hold promise. We recently noticed this with PLYA.
Over the past two months, 2 earnings estimates have risen versus no declines for the full year. These revisions helped boost the PLYA consensus estimate from $0.12 to $0.32 over the past 60 days. Regarding the next fiscal year, 2 estimates have increased while there have been no downward revisions during the same period.
Considering all of this, it’s no surprise that PLYA is a #1 (Strong Buy) stock with a Momentum Score of B. If you’re looking for a new pick that’s expected to rise in the near term, be sure to keep Playa Hotels & Resorts on your shortlist.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know our top 10 picks for all of 2022?
From its creation in 2012 to 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% vs. +348.7% for the S&P 500. Now our research director has combed through 4,000 companies covered by the Zacks Ranking and selected the top 10 tickers to buy and keep. Don’t miss your chance to enter…because the sooner you do, the better your chances of winning.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.