This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Can We Get Much Higher? 5 Rallying But Still Undervalued Stocks

James Dennin, Kapitall: These undervalued stocks are rallying well above their 200 day SMA. Can they get much higher?

While the stock market took a slight dip in January, there are still many analysts who think that it will still go much higher in 2014, as much as 7 or 8% depending on how the rest of the economy does throughout the spring and summer months.

The reason behind their thinking has to do with the technical performance of stocks in the year so far. 

The simple moving average (SMA) of a stock is the average closing price for the stock over a set period of time. As of now, the three most commonly cited SMAs, the SMA 50, 100, and 200 — are all moving in more or less perfect tandem. 

[Read more from Kapitall: Can You Profit from the Internet of Things?]

Even when stocks receded, the average SMA 50 never dipped below the SMA 100. This indicates that the momentum on the stock market hasn't really abated if you look outside the day-to-day performance of each company. 

Earnings will drive stock market growth this year. Without the Fed buying assets to drive up stock prices their only support going forward will be better earnings. Fortunately as the economy improves this will get more and more likely. We decided to run a screen to see which companies were rallying but also seemed likely to grow their earnings.

To do that we ran a screen on stocks that trade on the S&P 500 index. We wanted companies that are rallying, so we screened for stocks that trade at least 15% above their SMA 200. Then, to narrow the screen further we looked for a mismatch between earnings per share (EPS) and price

Earnings per share is the ratio between a company's earnings and the amount of shares in the stock's float. When EPS goes up it means that the company is doing a better job of generating more earnings for each share of equity. When EPS goes up faster than the stock's price it's called an EPS/Price mismatch. This indicates that the company might be undervalued and could support a higher stock price. 

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 18,050.31 -181.71 -1.00%
S&P 500 2,107.50 -18.56 -0.87%
NASDAQ 5,032.5240 -56.8380 -1.12%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs