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Expect High Growth From These Rallying S&P 500 Stocks

It's been a heady week for the main US stock indexes, buffeted by housing prices, GDP reports and jobless claims, not to mention the ongoing speculation circling the Federal Reserve's stimulus plans. But on Thursday the Standard & Poor's 500 index saw roughly 6.5 billion shares traded, an increase of 3.7% compared to its three-month average. So we decided to search for some winning stocks among the S&P 500's constituents.

We began by screening the S&P 500 for 5-year projected Earnings-per-share growth above 15%, a signal that investors see strong long-term growth potential.

We then limited our search to rallying stocks, which can also trigger positive sentiments. Specifically we ran a screen for stocks that are trading above their 20-day, 50-day, and 200-day moving averages (MA), indicating that these stocks have strong upward momentum.

This left us with three companies on our list below. We decided to also look at their price-to-earnings ratios, specifically Forward Price to Earnings (Forward P/E), Price to Free Cash Flow (P/FCF) and Price to Book (P/B) ratios

Forward P/E ratios below P/E ratios normally suggest that earnings are expected to grow in the near future.

P/FCF = Market Capitalization / Free Cash Flow

P/B = Stock Price / (Total Assets – Intangible Assets and Liabilities)

On average, stocks with a P/FCF under 15 and P/B under 1 are considered undervalued.

The List

For an interactive version of this chart, click on the image below. Average analyst ratings sourced from Zacks Investment Research.

Do you see further upside to these S&P 500 stocks? Use the list and data below as a starting point for your own analysis

 

1. Goodyear Tire & Rubber Co. (GT): Engages in the development, manufacture, distribution, and sale of tires, and related products and services to consumer and commercial customers worldwide.

  • Market cap at $3.88B, most recent closing price at $15.82
  • EPS next 5 years: 41.00%
  • 20 day MA: 16.11%
  • 50 day MA: 22.11%
  • 200 day MA: 23.22%
  • P/E: 19.29
  • Forward P/E: 6.40
  • P/FCF: N/A
  • P/B: 7.26

GT has recorded great gains over the last month, and its rally outshines its closest competitors. The stock returned 21.64% since 4/29/13, better than Berry Plastics Group, Inc. (BERY) and Titan International Inc. (TWI), which returned 12.69% and 9.10% during the same holding period.

The company's earnings growth looks weak, with EPS growing by -37.45% over the last year. This is considerably weaker than competitors like BERY (EPS growth over the last year at 100.67%) and TWI (EPS growth over the last year at 55.43%).

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