Momentum investing is a strategy that bucks the conventional wisdom of ‘buying low and selling high.’ Momentum investors instead focus on identifying stocks that are already rising and betting that they will continue to climb. This can be a lucrative approach, but it’s not without risk. Momentum stocks can often lose steam once their valuation outpaces their growth potential, leaving investors with overpriced shares with limited upside.
To navigate this risk, investors can look for bargain stocks with recent price momentum. This is where the Zacks Momentum Style Score comes in handy, as it pinpoints stocks with strong price or earnings trends. Empresa EDN is a recent standout that fits this profile.
EDN’s recent price surge is a clear indicator of investor interest. The stock has seen a remarkable 42.1% increase over the past four weeks. While short-term price spikes are common, sustained momentum is what separates the real winners from the noise. EDN checks this box as well, with a 55.6% gain over the past 12 weeks.
Furthermore, EDN’s momentum is fast-paced, as reflected in its beta of 1.39. This means the stock tends to move 39% more than the market in either direction. With this impressive performance, it’s no surprise that EDN boasts a Momentum Score of A, suggesting a high probability of success for those looking to capitalize on its momentum.
In addition to its strong momentum, EDN has earned a Zacks Rank #2 (Buy) thanks to upward revisions in earnings estimates. Research has shown that momentum is particularly potent among Zacks Rank #1 and #2 stocks. As analysts become more bullish on a stock, more investors take notice, driving up demand and pushing the price higher.
Importantly, EDN’s momentum doesn’t come at the expense of valuation. The stock trades at a Price-to-Sales ratio of 0.54, which is considered attractive. This means investors are paying just 54 cents for every dollar of sales. This suggests that EDN has ample room for further growth, particularly given its rapid momentum.
Empresa EDN presents a compelling case for investors seeking a combination of momentum and value. Its strong price performance, fast-paced momentum, favorable earnings revisions, and attractive valuation make it an intriguing investment opportunity.
