Momentum investors, unlike traditional investors, don’t focus on “buying low and selling high.” Instead, they believe in the power of “buying high and selling higher” to generate significant returns quickly. While everyone is drawn to fast-moving, trending stocks, identifying the right entry point is crucial. These stocks often lose their momentum when their future growth potential fails to justify their inflated valuation, leaving investors with limited or even negative upside potential.
Therefore, relying solely on traditional momentum parameters to invest in a stock can be risky. A more strategic approach is to invest in bargain stocks that have recently exhibited price momentum. This is where Zacks’ “Fast-Paced Momentum at a Bargain” screen comes in, designed to pinpoint fast-moving stocks with attractive valuations. LivePerson (LPSN), a customer-service technology company, is a prime example of such a stock.
Here’s why LPSN stands out as a strong investment opportunity:
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Growing Investor Interest:
LPSN’s recent price increase reflects significant investor interest. The stock has surged 33.8% in the past four weeks. While short-term price spikes can occur, truly momentum-driven stocks consistently deliver positive returns over the long term. LPSN meets this criterion, having gained 58.5% in the past 12 weeks.*
Fast-Paced Momentum:
LPSN exhibits fast-paced momentum, evidenced by a beta of 1.73. This means the stock moves 73% higher than the market in either direction, demonstrating its sensitivity to market fluctuations. This rapid price movement, coupled with the stock’s favorable Momentum Score of A, indicates a strong potential for continued growth.*
Upward Earnings Revisions:
LPSN has earned a Zacks Rank #2 (Buy), driven by an upward trend in earnings estimate revisions. This positive sentiment from analysts attracts investors and further contributes to the stock’s momentum. Research shows that Zacks Rank #1 and #2 stocks exhibit a strong momentum effect, as increased analyst confidence translates into higher investor interest.*
Attractive Valuation:
Despite its fast-paced momentum, LPSN trades at a reasonable valuation. Its Price-to-Sales ratio, a key valuation metric, sits at 0.26, meaning investors pay only 26 cents for each dollar of sales. This suggests ample room for future growth at a rapid pace.In conclusion, LivePerson (LPSN) presents a compelling opportunity for investors seeking to capitalize on momentum stocks. Its impressive price performance, fast-paced momentum, favorable analyst sentiment, and attractive valuation make it a strong candidate for consideration.
