Momentum investing is all about riding the wave of a stock’s recent trend, whether it’s going up or down. In the ‘long’ context, it’s essentially ‘buying high, hoping to sell even higher.’ This strategy thrives on recognizing and capitalizing on these trends. Once a stock establishes a clear direction, it’s more likely to continue moving in that way, potentially leading to profitable trades. While momentum is a popular stock characteristic, defining it can be tricky. There’s much debate about which metrics are best and worst to focus on, but the Zacks Momentum Style Score, part of the Zacks Style Scores system, provides a helpful framework.
Let’s examine Jefferies (JEF), which currently boasts a Momentum Style Score of ‘B’. We’ll delve into the key drivers of this score, including price change and earnings estimate revisions. It’s also crucial to understand that Style Scores work in conjunction with the Zacks Rank, our stock rating system known for its impressive track record of outperformance. Currently, Jefferies holds a Zacks Rank of #2 (Buy). Our research demonstrates that stocks with a Zacks Rank of #1 (Strong Buy) and #2 (Buy), coupled with Style Scores of ‘A’ or ‘B’, consistently outperform the market in the following month.
Is Jefferies Poised to Beat the Market?
To determine if JEF is a solid momentum pick, let’s analyze some of the key momentum style elements and see if this investment banking and capital markets company measures up.
One significant benchmark for a stock’s momentum is its short-term price activity. This reflects current investor interest and whether buyers or sellers hold the upper hand. Comparing a security to its industry can also be insightful, helping investors identify top performers within a specific sector.
For JEF, shares have climbed 1.64% over the past week, while the Zacks Financial – Miscellaneous Services industry has declined by 0.47% during the same period. From a longer-term perspective, shares look promising too. The monthly price change of 5.8% favorably compares to the industry’s 3.53% performance.
While any stock can see its price increase, it takes a truly winning stock to consistently beat the market. Therefore, examining longer-term price metrics, such as performance over the past three months or year, can be beneficial. Over the past quarter, Jefferies shares have risen 32.45%, and they’re up 57.29% in the last year. In contrast, the S&P 500 has only moved 5.01% and 23.98%, respectively, over the same periods.
Investors should also pay attention to JEF’s average 20-day trading volume. Volume is a valuable indicator in various ways, and the 20-day average establishes a good price-to-volume baseline. A rising stock with above-average volume is generally a bullish sign, while a declining stock on above-average volume is typically bearish. JEF is currently averaging 1,065,169 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score encompasses various factors, including estimate revisions and a stock’s price movement. Investors should remember that earnings estimates are also crucial to the Zacks Rank, and a positive trajectory in this area can be very promising. This is precisely what we’ve observed with JEF recently. Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions have contributed to a boost in JEF’s consensus estimate, which has increased from $2.95 to $3.06 in the past 60 days.
Looking at the next fiscal year, 2 estimates have moved upwards, while there have been no downward revisions in the same time period.
Bottom Line
Considering these factors, it’s no surprise that JEF holds a #2 (Buy) stock rating and boasts a Momentum Score of ‘B’. If you’re seeking a fresh pick with the potential for near-term growth, be sure to include Jefferies on your shortlist.
