Momentum investing revolves around the idea of following a stock's recent trend in either direction. In "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 Drilling Tools International Corp. (DTI), which currently has a Momentum Style Score of B. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.
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. Drilling Tools International Corp. currently has a Zacks Rank of #1 (Strong 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?
Let's discuss some of the components of the Momentum Style Score for DTI that show why this company shows promise as a solid momentum pick.
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 is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For DTI, shares are up 10.98% over the past week while the Zacks Oil and Gas - Field Services industry is up 4.23% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 53.06% compares favorably with the industry's 17.12% performance as well.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Over the past quarter, shares of Drilling Tools International Corp. have risen 81.16%, and are up 16.82% in the last year. On the other hand, the S&P 500 has only moved 1.56% and 16.34%, respectively.
Investors should also take note of DTI'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 DTI is averaging 276,612 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 DTI.
Over the past two months, 1 earnings estimate moved higher compared to none lower for the full year. This revision helped boost DTI's consensus estimate, increasing from $0.01 to $0.02 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.
Bottom Line
Given these factors, it shouldn't be surprising that DTI is a #1 (Strong Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Drilling Tools International Corp. on your short list.
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Drilling Tools International Corp. (DTI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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