A question likely to be on the minds of many investors right now is how heightened geopolitical and economic concerns will affect mid-cap stocks like Euromoney Institutional Investor (LON:ERM).
Shares in Euromoney Institutional Investor are currently trading at 1,082p. But to assess whether the price is likely to fall or recover over the next 12 months, we need a objective means of knowing whether it is able to withstand economic shocks and weather market volatility. To do this, it’s worth looking at the stock’s profile to see where its strengths lie.
Above all, we are interested in finding impartial ways to watch Euromoney Institutional Investor – something that takes the emotion out of the analysis…
Encouragingly, it is showing signs of performing well against some important financial and technical metrics and there are some signs of high quality and strong momentum in stock.
Research shows that high quality Stocks tend to be resilient, cash-generating businesses that can compound investment returns over time. Likewise, strong momentum price and earnings is an indicator of positive trends that have the potential to continue.
Here’s why these factors are important:
Why Quality Stocks Pay
When it comes to stock analysis, company quality tends to translate into high profitability and strong margins, some of the best in the industry. These types of businesses are stable, growing, and often have accelerating sales and profits. They also have solid and improving financial histories, with no signs of bookkeeping or bankruptcy risk.
One of Euromoney Institutional Investor’s quality indicators is its return on capital employed over 5 years, which is 11.1%. Good double-digit ROCE indicates companies that can grow very profitably.
Harness the power of momentum
Positive dynamic trends are evident in stock prices and earnings growth. You can find the clues in stocks that are trading near their 52-week highs and outperforming the market. They will often exceed broker estimates and get forecast updates and recommendation changes.
There are signs of this at Euromoney Institutional Investor, where the stock price has returned 0.37% relative to the market over the past 12 months. Market volatility and economic uncertainty can significantly dampen momentum, but previously strong stocks can quickly rally when confidence returns.
In summary, good quality and momentum indicate some of the best stocks on the strongest uptrends. This combination of factors can be a clue to finding stocks that can generate solid investment profits over many years.
In good times, these stocks can become expensive to buy. But in volatile markets, there may be chances to buy them at cheaper prices.
What does this mean for potential investors?
Finding good quality stocks with strong momentum behind them is a strategy used by some of the world’s most successful investors. But beware: these factors do not guarantee future returns and we have identified some areas of concern with Euromoney Institutional Investor which you can read about here.
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