Here's Why Momentum Investors Will Love Acuity Brands (AYI)
Does Acuity Brands (AYI) have what it takes to be a top stock pick for momentum investors? Let's find out.
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 Acuity Brands (AYI), 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. Acuity Brands 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 AYI is a promising momentum pick, let's examine some Momentum Style elements to see if this lighting maker holds up.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.
For AYI, shares are up 2.69% over the past week while the Zacks Building Products - Lighting industry is up 3.98% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 6.75% compares favorably with the industry's 0.35% performance as well.
While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Over the past quarter, shares of Acuity Brands have risen 21.9%, and are up 81.78% in the last year. In comparison, the S&P 500 has only moved 10.35% and 29.78%, respectively.
Investors should also take note of AYI'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, AYI is averaging 332,265 shares for the last 20 days.
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 AYI.
Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. These revisions helped boost AYI's consensus estimate, increasing from $11.12 to $11.17 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.
Given these factors, it shouldn't be surprising that AYI 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 Acuity Brands on your short list.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>
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
Acuity Brands Inc (AYI): Free Stock Analysis Report
To read this article on Zacks.com click here.