New analyst coverage is highly beneficial for investors, providing them with comprehensive data on stocks that is crucial for making informed investment decisions. Analysts possess access to vital information, and their insights are invaluable in preventing misinterpretation and potential misvaluation of stocks.
Recently, several stocks, including Intrepid Potash, Inc. IPI, Fortrea Holdings Inc. FTRE and Cricut, Inc. CRCT, have attracted the attention of analysts, signaling potential value and growth opportunities for investors.
Analysts don’t randomly choose which stocks to cover. Their decision is typically driven by significant investor interest or promising prospects associated with a particular stock.
An interesting observation is that when stocks receive new analyst coverage, they often experience gradual upward price movements compared to those already covered by analysts. The magnitude of this price movement is influenced by the recommendations made by the new analysts. Positive recommendations like “Buy” and “Strong Buy” tend to result in more substantial positive price reactions than “Strong Sell,” “Sell,” or “Hold” recommendations.
When an analyst provides a new recommendation for a company with limited or no prior analyst coverage, investors pay increased attention to the stock. Additionally, portfolio managers may become interested in building positions in such stocks due to the fresh information.
Rather than focusing solely on a single recommendation change, it is advisable to consider the average change in broker recommendations. Upgrades, initiations, and increased coverage by multiple analysts carry equal significance in assessing a stock’s potential.
To create a prudent investment strategy, it’s worthwhile to concentrate on the number of analyst recommendations that have increased in recent weeks. This approach can offer valuable insights into the overall sentiment and potential trajectory of a stock, helping investors make well-informed decisions.
Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago (this will shortlist stocks that have recent new coverage).
Average Broker Rating less than Average Broker Rating four weeks ago (“less than” means “better than” four weeks ago).
Increased analyst coverage and improving average rating are the primary criteria of this strategy but one should also consider other relevant parameters to make it foolproof.
Here are the other screening parameters:
Price greater than or equal to $5 (as a stock below $5 will not likely create significant interest for most investors).
Average Daily Volume greater than or equal to 100,000 shares (if the volume isn’t enough, it will not attract individual investors).
Here are three out of the six stocks that passed the screen:
Intrepid Potash: Based in Denver, CO, this company remains engaged in the extraction and production of potash in the United States and internationally. The company’s shares have gained 19% in the past three months against the industry’s 0.7% decrease.
IPI – a Zacks Rank #3 (Hold) company — currently flaunts a VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum. Although earnings estimates for 2023 have declined, the same for 2024 increased to 65 cents per share from a loss estimate of 16 cents over the past 60 days. This depicts analysts’ optimism about the company.
Fortrea: This Durham, NC-based company provides clinical development and patient access solutions to the life sciences industry. After completing its spin-off from Labcorp, Fortrea became an independent public company and began trading on the Nasdaq stock exchange on Jun 30, 2023 under the ticker “FTRE.” This company is poised to drive growth prospects across phase I-IV clinical trials and patient accessibility, while further fortifying its presence in the fields of oncology, clinical pharmacology, and collaborative partnership models. The company’s shares have gained 7.1% in the past month, comparing favorably with the industry’s 0.6% increase.
FTRE – a Zacks Rank #3 company — surpassed the Zacks Consensus Estimate in the last reported quarter by 33.3%. The consensus mark for earnings is currently pegged at $1.36 for 2023 and $1.45 for 2024. For 2024, the consensus estimate implies 6.6% year-over-year growth.
Cricut: Located in South Jordan, UT, this firm specializes in crafting and promoting a creativity platform, empowering individuals to transform their concepts into polished, artisanal products.
CRCT shares have underperformed the industry so far this year. Nonetheless, the estimated earnings figure indicates 46.2% year-over-year growth for 2024. It currently flaunts a VGM Score of B.
Intrepid Potash, Inc (IPI): Free Stock Analysis Report
This article originally appeared on Zacks
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