Investing 101: Rallying Large Caps With EPS-Price Mismatches

Do you want to jump onto trending stocks? Sometimes the rallies can continue for extended periods of time, and indicating that a stock hasn't realized its value yet. One way of checking the stock's remaining potential is by looking for EPS/price mismatches. Read more to learn about these terms. 

Rallying
When a stock is rallying it means it is performing above its moving average for a given time period. It is presented as a percent of performance relative to the average. When a stock is trading above its 20-day simple moving average as well as its 50- and 200-day MAs, it signals bullish momentum.

EPS/Price mismatch
EPS is the amount of profit that is allotted to each share of a company after dividends have been paid out. Higher EPS and faster EPS growth are both positive signs of profitability.

EPS = (net income – dividends)/(outstanding shares)

Price-to-EPS is one of the most widely used ratios. Although P/E values are not constant over time, if EPS is rising faster than price, then the P/E ratio is falling, which could be a sign that the stock is undervalued.

Business section: Investing ideas
Below is a list of large-cap stocks that are trading above their 20-, 50-, and 200-day moving averages. The names also have seen their earnings per share climb faster than their price. Do you think they are undervalued?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Ecopetrol: Operates as an integrated oil company. The company has a market cap of $136.59 billion, most recent closing price at $66.64. The stock is currently trading at 8.65% above its 20-day SMA, 14.26% above its 50-day SMA, and 45.42% above its 200-day SMA. The EPS estimate for the company's current year increased from $4.46 to $4.77 over the last 30 days, an increase of 6.95%. This increase came during a time when the stock price changed by 3.31% (from $61.09 to $63.11 over the last 30 days).

2. American International Group (NYSE: AIG  ) : The company operates property and casualty insurance networks worldwide and conducts activities in the U.S. life insurance and retirement services industry. The company has a market cap of $64.76 billion, most recent closing price at $34.57. The stock is currently trading at 3.88% above its 20-day SMA, 11.87% above its 50-day SMA, and 32.03% above its 200-day SMA. The EPS estimate for the company's current year increased from $2.57 to $3.01 over the last 30 days, an increase of 17.12%. This increase came during a time when the stock price changed by 11.77% (from $30.83 to $34.46 over the last 30 days).

3. Fomento Econ: Engages in non-alcoholic beverage, retail, and beer industries. The company has a market cap of $145.69 billion, most recent closing price at $82.25. The stock is currently trading at 0.62% above its 20-day SMA, 5.22% above its 50-day SMA, and 17.58% above its 200-day SMA. The EPS estimate for the company's current year increased from $2.71 to $3.04 over the last 30 days, an increase of 12.18%. This increase came during a time when the stock price changed by 1.67% (from $82.27 to $83.64 over the last 30 days).

4. Capital One Financial (NYSE: COF  ) : Operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services in the United States, Canada, and the United Kingdom. The company has a market cap of $28.26 billion, most recent closing price at $56.16. The stock is currently trading at 1.85% above its 20-day SMA, 4.19% above its 50-day SMA, and 19.42% above its 200-day SMA. The EPS estimate for the company's current year increased from $5.93 to $6.37 over the last 30 days, an increase of 7.42%. This increase came during a time when the stock price changed by 0.57% (from $55.74 to $56.06 over the last 30 days).

5. Travelers: Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. The company has a market cap of $25.19 billion, most recent closing price at $64.93. The stock is currently trading at 5.73% above its 20-day SMA, 8.85% above its 50-day SMA, and 16.77% above its 200-day SMA. The EPS estimate for the company's current year increased from $5.74 to $6.35 over the last 30 days, an increase of 10.63%. This increase came during a time when the stock price changed by 8.13% (from $59.20 to $64.01 over the last 30 days).

6. BB&T (NYSE: BBT  ) : Operates as the financial holding company for Branch Banking and Trust Company, which provides banking and trust services to small and mid-sized businesses, public agencies, local governments, and individuals in the United States. The company has a market cap of $22.48 billion, most recent closing price at $32.33. The stock is currently trading at 1.82% above its 20-day SMA, 4.56% above its 50-day SMA, and 26.38% above its 200-day SMA. The EPS estimate for the company's current year increased from $2.51 to $2.68 over the last 30 days, an increase of 6.77%. This increase came during a time when the stock price changed by 3.95% (from $31.39 to $32.63 over the last 30 days).

7. ASML Holding: Engages in designing, manufacturing, marketing, and servicing semiconductor processing equipment used in the fabrication of integrated circuits. The company has a market cap of $20.48 billion, most recent closing price at $50.42. The stock is currently trading at 1.97% above its 20-day SMA, 4.42% above its 50-day SMA, and 21.91% above its 200-day SMA. The EPS estimate for the company's current year increased from $3.38 to $3.63 over the last 30 days, an increase of 7.4%. This increase came during a time when the stock price changed by 1.91% (from $50.14 to $51.1 over the last 30 days).

8. Yahoo! (Nasdaq: YHOO  ) : Operates as a digital media company that delivers personalized digital content and experiences across devices. The company has a market cap of $18.89 billion, most recent closing price at $15.56. The stock is currently trading at 0.74% above its 20-day SMA, 1.96% above its 50-day SMA, and 3% above its 200-day SMA. The EPS estimate for the company's current year increased from $0.82 to $0.94 over the last 30 days, an increase of 14.63%. This increase came during a time when the stock price changed by 2.3% (from $15.22 to $15.57 over the last 30 days).

9. Aon: Provides risk management, insurance and reinsurance brokerage, and human resource consulting and outsourcing services in the United States and internationally. The company has a market cap of $15.91 billion, most recent closing price at $51.66. The stock is currently trading at 3.54% above its 20-day SMA, 5.46% above its 50-day SMA, and 10.43% above its 200-day SMA. The EPS estimate for the company's current year increased from $3.56 to $4.39 over the last 30 days, an increase of 23.31%. This increase came during a time when the stock price changed by 5.22% (from $49.06 to $51.62 over the last 30 days).

10. Seagate Technology (NYSE: STX  ) : Designs, manufactures, markets, and sells hard disk drives for the enterprise, client compute, and client non-compute market applications in the United States and internationally. The company has a market cap of $13.93 billion, most recent closing price at $31.93. The stock is currently trading at 9.50% above its 20-day SMA, 12.99% above its 50-day SMA, and 69.86% above its 200-day SMA. The EPS estimate for the company's current year increased from $6.28 to $7.12 over the last 30 days, an increase of 13.38%. This increase came during a time when the stock price changed by 9.74% (from $26.95 to $29.58 over the last 30 days).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


 

Kapitall's Danny Guttridge does not own any of the shares mentioned above. The Motley Fool owns shares of Yahoo! and Aon. Motley Fool newsletter services have recommended buying shares of Yahoo!, Fomento Econ, and Aon. The Motley Fool has a disclosure policy.
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