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.
While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance.
Below, we take a look at Toast TOST, a company that currently holds a Momentum Style Score of A. 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. Toast 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.
Set to Beat the Market?
In order to see if TOST is a promising momentum pick, let's examine some Momentum Style elements to see if this restaurant software provider 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 TOST, shares are up 17.99% over the past week while the Zacks Internet - Software industry is down 0.23% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 20.09% compares favorably with the industry's 0.87% performance as well.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Toast have increased 20.52% over the past quarter, and have gained 39.06% in the last year. In comparison, the S&P 500 has only moved 5.76% and 28.32%, respectively.
Investors should also pay attention to TOST'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. TOST is currently averaging 7,762,061 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with TOST.
Over the past two months, 5 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost TOST's consensus estimate, increasing from -$0.22 to -$0.16 in the past 60 days. Looking at the next fiscal year, 5 estimates have moved upwards while there have been no downward revisions in the same time period.
Bottom Line
Given these factors, it shouldn't be surprising that TOST is a #2 (Buy) stock and boasts a Momentum Score of A. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Toast on your short list.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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