Zacks.com Featured Highlights: Fortuna Silver Mines, Ritter Pharmaceuticals , Organovo Holdings, Western Digital And Willdan Group
Zacks Investment Research | Nov 19, 2017 09:22PM ET
For Immediate Release
Chicago, IL – November 20, 2017 - Stocks in this week’s article Fortuna Silver Mines Inc. (NYSE:FSM) , Ritter Pharmaceuticals Inc. (NASDAQ:RTTR) , Organovo Holdings, Inc. (NASDAQ:ONVO) , Western Digital Corporation (NASDAQ:WDC) and Willdan Group Inc. (NASDAQ:WLDN)
Take the Road Less Traveled: Rising P/E for 5 Winning Stocks
Picking undervalued stocks with a low price-to-earnings (P/E) ratio is a common investing strategy. The logic is simple — the stock’s current price does not reflect its higher earnings and therefore leaves room for upside.
But very few believe that stocks with a rising P/E are worth buying. Let’s discuss this less-favored strategy in details.
Strength of Increasing P/E
The concept is that as earnings rise, so should the price of the stock. As forecasts for expected earnings come in higher, strong demand for the stock should continue to drive its price. After all, a stock's P/E gives an indication of how much investors are ready to shell out per dollar of earnings.
Suppose an investor wants to buy a stock with a P/E ratio of 30, it means that he is willing to pay $30 for only $1 worth of earnings. Now if the P/E ratio becomes 35 within a short spell of time, it means that the person is now ready to pay $35 for only $1 worth of earnings. It shows that the investor expects earnings of the company to rise at a faster pace in the future owing to strong fundamentals.
So, if the P/E of a stock is rising steadily, it means that investors are assured of its inherent strength and expect some strong positives out of it. Also, studies have revealed that stocks have seen their P/E ratios jump over 100% from their breakout point in the cycle. So, if you can pick stocks early in their breakout cycle, you can end up seeing considerable gains.
For the rest of this Screen of the Week article please visit Zacks.com at: Original post
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