Zacks.com Featured Highlights Include: Catabasis, Ligand, Key, Carbonite And Second Sight
Zacks Investment Research | Mar 19, 2019 12:26AM ET
For Immediate Release
Chicago, IL – March 19, 2019 - Stocks in this week’s article are Catabasis Pharmaceuticals Inc. (NASDAQ:CATB) , Ligand Pharmaceuticals Inc. (NASDAQ:LGND) , Key Energy Services Inc. (NYSE:KEG) , Carbonite Inc. (NASDAQ:CARB) and Second Sight Medical Products Inc. (NASDAQ:EYES) .
Rising P/E an Overlooked Criterion: 5 Top Stocks
Trying hands at bargain stocks that have a low price-to-earnings (P/E) ratio is a common practice. The perception is that the lower the P/E, the higher will be the value of the stock. This inference is drawn on the simple logic that a stock’s current market price does not justify (is not equivalent to) its higher earnings and therefore the stock has room to run.
But have you ever given it a thought that stocks with a rising P/E can also be worth buying. We’ll tell you why this often-overlooked approach may go a long way to reap some solid returns for you.
Why Rising P/E is a Valuable Tool
Investors should note that stock price moves in tandem with earnings performance. If earnings come in stronger, the price of a stock shoots up. Solid quarterly earnings and the forward guidance boost earnings forecasts, leading to stronger demand for the stock and an uptrend in its price.
So, if the price is rising steadily, it means that investors are assured of the stock’s fundamental strength and expect some solid positives out of it. Suppose an investor wants to buy a stock with a P/E ratio of 30, it means that he is willing to shell out $30 for only $1 worth of earnings. This is because the investor expects earnings of the company to rise at a faster pace in the future on strong fundamentals.
Also, studies have revealed that stocks have seen their P/E ratios jump more than 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:Zacks Investment Research
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