Bet on 5 Top-Ranked Stocks With Rising P/E for Soild Gains

Investors often opt for the stock-picking approach that involves stocks with a low price-to-earnings (P/E) ratio. This strategy is based on the notion that the lower the P/E ratio is, the higher the stock value. The reasoning behind this is straightforward — when a stock's current market price does not adequately reflect its higher earnings, it suggests potential for growth.But there is more to this whole P/E story. Because not only low P/E, stocks with a rising P/E can also fetch strong returns. In this regard, investors can bet on the likes of Land's End LE, Humana HUM, Rent the Runway RENT, Becton, Dickinson and Company BDX and ATI Inc. ATI.Rising P/E: A Useful ToolThe concept is that as earnings rise, so should the price of the stock. As forecasts for expected earnings come in higher, strong demand for the stock should continue to push up its prices. After all, astock's P/E gives an indication of how much investors are ready to shell out per dollar of earnings.Suppose an investor wants to buy a stock with a P/E ratio of 30. This means that he is willing to shell out $30 for only $1 worth of earnings as he expects earnings of the company to rise at a faster pace in the future owing to strong fundamentals.So, if the P/E of a stock is rising steadily, it means that investors are assured of its inherent strength and expect some strong positives out of it.Also, studies have revealed that stocks have seen their P/E ratios jump over 100% from their breakout point in the cycle. So, if you can pick stocks early in their breakout cycle, you can end up seeing considerable gains.The Winning StrategyIn order to shortlist stocks that are exhibiting an increasing P/E, we chose the following as our primary screening parameters.EPS growth estimate for the current year is greater than or equal to last year’s actual growthPercentage change in last year EPS should be greater than or equal zero(These two criteria point to flat earnings or a growth trend over the years.)Percentage change in price over four weeks greater than the percentage change in price over 12 weeksPercentage change in price over 12 weeks greater than percentage change in price over 24 weeks(These two criteria show that price of the stock is increasing consistently over the said timeframes.)Percentage price change for four weeks relative to the S&P 500 greater than the percentage price change for 12 weeks relative to the S&P 500Percentage price change for 12 weeks relative to the S&P 500 greater than the percentage price change for 24 weeks relative to the S&P 500(Here, the case for consistent price gains gets even stronger as it displays percentage price changes relative to the S&P 500.)Percentage price change for 12 weeks is 20% higher than or equal to the percentage price change for 24 weeks, but it should not exceed 100%(A 20% increase in the price of a stock from the breakout point gives cues of an impending uptrend. But a jump of over 100% indicates that there is limited scope for further upside and that the stock might be due for a reversal.)In addition, we place a few other criteria that lead us to some likely outperformers.Zacks Rank less than or equal to 2: Only companies with a Zacks Rank #1 (Strong Buy) or 2 (Buy) can get through.Average 20-day Volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.Just these few criteria narrowed down the universe from over 7,700 stocks to just 57.Here are five out of the 57 stocks:Land's End: The Zacks Rank #2  company operates as a multi-channel retailer. It offers men's, women's, and kids' apparel, outerwear and swimwear; specialty apparel; accessories; footwear; and home products. You can see the complete list of today’s Zacks #1 Rank stocks here.The average four-quarter earnings surprise of LE is 48.81%.Humana: The Zacks Rank #2 company is one of the largest health care plan providers in the United States.The average four-quarter earnings surprise of HUM is 0.17%.Rent the Runway: The Zacks Rank #2 company provides shared designer closet. The Closet in the Cloud offers a wide assortment of items for every occasion, from evening wear and accessories to ready-to-wear, workwear, denim, casual, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, ski wear, home goods and kidswear.The average four-quarter earnings surprise of RENT is 9.20%.Becton, Dickinson and Company: The Zacks Rank #2 company is a medical technology company engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents.The average four-quarter earnings surprise of BDX is 6.51%.ATI Inc.: The Zacks Rank #2 company is a diversified specialty materials producer. ATI was created in November 1999 when Allegheny Teledyne spun out Teledyne Technologies and Water Pik Technologies into standalone companies.The average four-quarter earnings surprise of ATI is 3.67%.You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.Click here to sign up for a free trial to the Research Wizard today.Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. This aggressive transition could mean tremendous profits for nuclear-related stocks – and investors who get in on the action early enough.Our urgent report, Atomic Opportunity: Nuclear Energy's Comeback, explores the key players and technologies driving this opportunity, including 3 standout stocks poised to benefit the most.Download Atomic Opportunity: Nuclear Energy's Comeback free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Becton, Dickinson and Company (BDX): Free Stock Analysis Report ATI Inc. (ATI): Free Stock Analysis Report Humana Inc. (HUM): Free Stock Analysis Report Rent the Runway, Inc. (RENT): Free Stock Analysis Report Lands' End, Inc. (LE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks