Momentum investing thrives on following a stock’s recent trend, whether it’s heading up or down. In a ‘long’ scenario, investors are essentially ‘buying high, but hoping to sell even higher.’ This strategy emphasizes capitalizing on trends, as stocks are more likely to continue moving in the direction they’ve established. The goal is to make timely and profitable trades by identifying stocks that are on a clear path. While many investors seek momentum stocks, defining it accurately can be challenging. There’s ongoing debate about which metrics are most reliable indicators of future performance.
The Zacks Momentum Style Score, part of the Zacks Style Scores, aims to address this dilemma. Let’s take a closer look at International Flavors (IFF), which currently boasts a Momentum Style Score of ‘A,’ and analyze some of the key drivers behind this score, including price changes and earnings estimate revisions. It’s also worth noting that Style Scores work in conjunction with the Zacks Rank, our stock rating system with a proven track record of outperformance. International Flavors currently holds a Zacks Rank of #2 (Buy). Our research indicates that stocks with Zacks Rank #1 (Strong Buy) and #2 (Buy) along with Style Scores of A or B tend to outperform the market within the following month.
Is IFF Poised to Beat the Market?
To determine if IFF is a promising momentum pick, let’s examine some Momentum Style elements to see if this ingredients producer for the food, cosmetics, and consumer products industries holds its own. Analyzing a stock’s short-term price activity provides valuable insight into its momentum, as it reflects both current interest and whether buyers or sellers have the upper hand at the moment. Comparing a security to its industry can also be helpful, as it allows investors to identify top performers within a specific sector.
For IFF, shares have climbed 3.91% over the past week, while the Zacks Consumer Products – Staples industry has dipped 1.11% during the same period. From a longer-term perspective, shares appear strong as well, with a monthly price change of 7.45% compared favorably to the industry’s 2.61% performance.
While any stock can experience a surge in price, sustained outperformance is the hallmark of a true winner. Shares of International Flavors have risen 8.01% over the past quarter and gained 48.37% in the last year. In contrast, the S&P 500 has moved only 3.12% and 23.92%, respectively.
Investors should also pay attention to IFF’s average 20-day trading volume. Volume is a significant factor in many ways, and the 20-day average provides a good price-to-volume baseline. A rising stock with above-average volume is generally a bullish sign, while a declining stock with above-average volume typically indicates bearish sentiment. IFF is currently averaging 1,065,084 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score encompasses various elements, including estimate revisions and a stock’s price movement. It’s essential to recognize that earnings estimates are also crucial to the Zacks Rank, and a positive trajectory here can be encouraging. We’ve recently observed this with IFF. Over the past two months, 8 earnings estimates have moved higher compared to none lower for the full year. These revisions have boosted IFF’s consensus estimate, increasing from $3.87 to $4.22 in the past 60 days. Looking ahead to the next fiscal year, 8 estimates have moved upwards, with no downward revisions in the same timeframe.
Bottom Line
Considering all these factors, it’s no surprise that IFF is a #2 (Buy) stock with a Momentum Score of ‘A.’ If you’re seeking a fresh pick with the potential for near-term gains, be sure to add International Flavors to your shortlist.
