Valuation

We know all about momentum stocks. These are stocks that are going higher and have high relative strength numbers (Akorn is a 93). But what about the investors who also demand value? I demand value, too! I would not own a stock that doesn't make sense from a valuation point of view. Performance alone is not enough.

Data from Best Stocks Now App

When I take next year's earnings estimates of AKRX which are 91 cents, grow those earnings by 21% per year (per consensus analysts' estimate), and then apply a multiple to those potential earnings five years from now, I get a target price of about $40 per share.

Akorn, in my opinion, still has substantial upside potential from a valuation point of view. It gets a value grade of B+. Stock Chart

What's the last test I demand of Best Stocks Now? It is the visual test, the stock chart test. I don't buy downtrends, I don't get excited by sideways trends, and I especially avoid topping out and rolling over trend like we just saw with Tesla (TSLA). How is the current one-year chart of Akorn?

Courtesy of StockCharts.com

AKRX flies through the visual test with flying colors.

The stock broke out in August of this year. It's been going up ever since and it broke out again recently to new all-time highs. Akorn passes my performance test, my valuation test, and my visual test.

Data from Best Stocks Now App

Out of 3,648 stocks in my database, Akorn comes in at #43. It is a stock that I currently own at Gunderson Capital Management.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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