Zacks Investment Research | Dec 04, 2017 09:35PM ET
For Immediate Release
Chicago, IL – Dec 5, 2017 - Stocks in this week’s article include: BioTime Inc. (NYSE:BTX) , Ritter Pharmaceuticals Inc. (NASDAQ:RTTR) , Organovo Holdings Inc. (NASDAQ:ONVO) , Signal Genetics Inc. (NASDAQ:MGEN) and Stratasys Ltd. (NASDAQ:SSYS) .
Screen of the Week of Zacks Investment Research:
Keep Faith in Rising P/E: 5 Top-Ranked Stocks
Generally, investors love stocks with a low price-to-earnings (P/E) ratio. The general perception is that the lower the P/E, the higher will be the value of the stock. The simple logic that a stock’s current market price does not justify (is not equivalent to) its higher earnings and therefore has room to run is behind investors’ inclination toward low P/E stocks.
But stocks with a rising P/E can also be worth buying. We’ll tell you why.
Why Rising P/E 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 strong 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. 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.
This is because the investor expects earnings of the company to rise at a faster pace in the future on the back of strong fundamentals. 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.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: Original post
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