Bet on These 5 Top-Ranked Stocks With Rising P/E

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 Strategic Education STRA, KBR KBR, Super Micro Computer SMCI, Okta OKTA and APi Group APG.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 46.Here are five out of the 46 stocks:Strategic Education: The Zacks Rank #2 Strategic Education, Inc. or SEI, through its subsidiaries Strayer University and New York Code and Design Academy (NYCDA), provides a range of post-secondary education and other academic programs in the United States. You can see the complete list of today’s Zacks #1 Rank stocks here.The average four-quarter earnings surprise of STRA is 32.81%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.KBR: The Zacks Rank #2 company is a global engineering, construction and services firm, supporting the market segments of global energy and international government services.The average four-quarter earnings surprise of KBR is 4.82%.Super Micro Computer: The Zacks Rank #2 company designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on x86 architecture.The average four-quarter earnings surprise of SMCI is 0.60%.Okta: The Zacks Rank #2 company is a provider of identity for the enterprise. The company offers Okta information technology Products and Okta for Developers.The average four-quarter earnings surprise of Okta is 27.15%.APi Group: The Zacks Rank #2 APi Group Corporation provides business services of safety, specialty and industrial.The average four-quarter earnings surprise of APG is 4.88%.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.Infrastructure Stock Boom to Sweep AmericaA massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.The only question is “Will you get into the right stocks early when their growth potential is greatest?”Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>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 Strategic Education Inc. (STRA): Free Stock Analysis Report KBR, Inc. (KBR): Free Stock Analysis Report Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report Okta, Inc. (OKTA): Free Stock Analysis Report APi Group Corporation (APG): 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