The Charles Schwab Corporation (SCHW) Up 5.00% in One Week: Key Insights for Investors

Momentum investing revolves around the strategy of capitalizing on a stock's recent trends, whether those are upward or downward. In the long-term context, this method leads investors to often buy stocks that are performing well with the hope of selling them at an even higher price. For those practicing momentum investing, it is crucial to seize profitable trends whenever they arise. The expectation is that once a stock begins to follow a particular direction, it is highly likely to continue along that path, making frequent and timely trades possible.

Despite its popularity, defining momentum as a characteristic of stocks can be a complex task. There is ongoing debate about which specific metrics to prioritize. However, the Zacks Momentum Style Score provides a valuable resource for identifying momentum characteristics effectively.

In this discussion, we will analyze The Charles Schwab Corporation (SCHW - Free Report), a company currently holding a Momentum Style Score of A. This score is influenced by key aspects such as price movement and adjustments in earnings estimates.

It's also worth noting that Style Scores complement the Zacks Rank—a stock rating system known for its strong performance. Currently, The Charles Schwab Corporation enjoys a Zacks Rank of #2 (Buy). Historical research shows that stocks with Zacks Rank #1 (Strong Buy) or #2 (Buy) and Style Scores of A or B tend to outperform the market over the following month.

Potential to Outperform Market

Let’s delve into the various components of SCHW's Momentum Style Score that demonstrate its potential as a sound momentum investment.

A useful approach to gauge a stock's momentum is to examine its short-term price activity, which reflects the current interest level from investors. Comparing this stock to its industry can further help in identifying the top performers.

For SCHW, shares have increased by 5% over the past week, in contrast to a 7.51% rise within the Zacks Financial - Investment Bank industry during the same timeframe. When we extend the observation period to the monthly change, SCHW showcases an impressive gain of 8.14%, which surpasses the industry's performance of 6.16%.

While many stocks may experience price increases, it is essential to identify those that can consistently outperform market averages. This is where longer-term performance metrics come into play. Over the past three months, shares of The Charles Schwab Corporation have grown by 12.57%, and over the last year, they have risen 26.61%. In comparison, the S&P 500 index has seen increases of only 3.62% and 26.55%, respectively.

Another key factor to monitor is SCHW's average trading volume over 20 days. Trading volume serves multiple purposes—if a stock experiences price growth coupled with above-average trading activity, it often signals bullish trends. Conversely, if a stock's price declines amid high trading volume, it may indicate bearish momentum. Currently, SCHW averages 6,598,758 shares traded daily over the last 20 days.

Earnings Projections

The Zacks Momentum Style Score accounts for several elements, including earnings estimates and a stock's price trends. Earnings estimates, in particular, play a significant role in the Zacks Rank system. Positive revisions in earnings forecasts can indicate future momentum, and The Charles Schwab Corporation has demonstrated this recently.

In the last two months, 9 earnings estimates for SCHW have been revised upwards, while only 1 has been lowered, leading to a consensus estimate rise from $3.86 to $4.04. Looking forward to the next fiscal year, 7 estimates have improved, with just 1 retraction.

Conclusion

Considering these insights, it is no surprise that SCHW commands a #2 (Buy) rating and holds a Momentum Style Score of A. Investors looking for a promising stock likely to see short-term gains should add The Charles Schwab Corporation to their roster of potential picks.

Investing, Momentum, Stocks