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 Great Lakes Dredge & Dock (GLDD), 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. Great Lakes Dredge & Dock 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 GLDD that show why this provider of dredging and dock-contracting services shows promise as a solid momentum pick.
Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.
For GLDD, shares are up 11.23% over the past week while the Zacks Building Products - Heavy Construction industry is up 3.79% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 24.78% compares favorably with the industry's 22.49% 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 Great Lakes Dredge & Dock have risen 1.18%, and are up 19.04% in the last year. In comparison, the S&P 500 has only moved -3.09% and 13.39%, respectively.
Investors should also pay attention to GLDD'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. GLDD is currently averaging 611,022 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score also takes into account trends in estimate revisions, in addition to price changes. Please note that estimate revision trends remain at the core of Zacks Rank as well. A nice path here can help show promise, and we have recently been seeing that with GLDD.
Over the past two months, 2 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost GLDD's consensus estimate, increasing from $0.69 to $0.93 in the past 60 days. Looking at the next fiscal year, 2 estimates have 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 GLDD is a #1 (Strong 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 Great Lakes Dredge & Dock on your short list.
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Great Lakes Dredge & Dock Corporation (GLDD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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