Zacks Equity Research
·4 min read
Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Rolls-Royce Holdings PLC (RYCEY), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.
It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Rolls-Royce Holdings PLC currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Set to Beat the Market?
In order to see if RYCEY is a promising momentum pick, let's examine some Momentum Style elements to see if this company holds up.
Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For RYCEY, shares are up 1.22% over the past week while the Zacks Aerospace - Defense Equipment industry is up 0.08% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 18.12% compares favorably with the industry's 1.82% performance as well.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Rolls-Royce Holdings PLC have increased 39.31% over the past quarter, and have gained 201.71% in the last year. On the other hand, the S&P 500 has only moved 10.82% and 32.56%, respectively.
Investors should also take note of RYCEY's average 20-day trading volume. Volume is a useful item in many 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, whereas a declining stock on above average volume is typically bearish. Right now, RYCEY is averaging 3,838,740 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with RYCEY.
Over the past two months, 3 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost RYCEY's consensus estimate, increasing from $0.16 to $0.20 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
Taking into account all of these elements, it should come as no surprise that RYCEY is a #2 (Buy) stock with a Momentum Score of B. If you've been searching for a fresh pick that's set to rise in the near-term, make sure to keep Rolls-Royce Holdings PLC on your short list.
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Rolls-Royce Holdings PLC (RYCEY) : Free Stock Analysis Report
