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.
While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores , helps address this issue for us.
Below, we take a look at KalVista Pharmaceuticals (KALV) , 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. KalVista Pharmaceuticals 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?
In order to see if KALV is a promising momentum pick, let's examine some Momentum Style elements to see if this pharmaceutical company holds up.
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 is also useful to compare a security to its industry, as this can help investors pinpoint the top companies in a particular area.
For KALV, shares are up 33.47% over the past week while the Zacks Medical - Drugs industry is up 1.71% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 35.51% compares favorably with the industry's 1.69% performance as well.
Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of KalVista Pharmaceuticals have increased 58.6% over the past quarter, and have gained 182% in the last year. In comparison, the S&P 500 has only moved 16.75% and 8.55%, respectively.
Investors should also pay attention to KALV'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. KALV is currently averaging 176,769 shares for the last 20 days.
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 KALV.
Over the past two months, 3 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost KALV's consensus estimate, increasing from -$1.79 to -$1.43 in the past 60 days. Looking at the next fiscal year, 1 estimate has moved upwards while there have been no downward revisions in the same time period.
Given these factors, it shouldn't be surprising that KALV 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 KalVista Pharmaceuticals on your short list.
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KalVista Pharmaceuticals, Inc. (KALV): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.