The Charles Schwab Corporation (SCHW) Is Up 5.00% in One Week: What You Should Know

Momentum investing revolves around the strategy of following a stock's recent price trends, which can either be rising or falling. In a long-position context, investors often find themselves "buying higher", with the hope of selling even higher later. For those who adopt this investment methodology, capitalizing on a stock's price trends is crucial. Once a stock begins to move in a specified direction, it is likely to continue that trajectory, which can lead to timely and lucrative trades.

While momentum is a widely recognized characteristic of stocks, defining it can be challenging. The ongoing debate about the most effective metrics to use has contributed to this complexity. However, the Zacks Momentum Style Score offers a helpful framework for addressing these concerns.

In this article, we will examine The Charles Schwab Corporation (SCHW - Free Report), which currently holds a Momentum Style Score of A. We will also review key components such as price changes and earnings estimate revisions—two critical factors that contribute to the Momentum Style Score.

It's important to mention that Style Scores work in conjunction with the Zacks Rank, a rating system that has consistently shown an ability to outperform the market. The Charles Schwab Corporation is presently rated #2 (Buy) by Zacks. Research indicates that stocks with a Zacks Rank of #1 (Strong Buy) or #2 (Buy), paired with Style Scores of A or B, tend to outperform the market over the subsequent month.

Potential Market Outperformer?

Let’s delve into the aspects of the Momentum Style Score for SCHW that indicate its potential as an appealing momentum investment.

A good benchmark for determining a stock's momentum is its short-term price activity, which signifies current market interest and reveals whether buyers or sellers are in control. Additionally, comparing a stock with its industry can be beneficial for identifying leading companies in a specific sector.

For SCHW, shares have seen a 5% increase over the past week, while the Zacks Financial - Investment Bank industry has performed slightly better, rising 7.51% during the same timeframe. Looking back over a longer period, SCHW has performed well, with an 8.14% price increase in the past month compared to the industry’s 6.16% growth.

While stock prices can increase for various reasons, consistent market-beating performance is a hallmark of a truly strong stock. Consequently, assessing longer-term price metrics—such as a stock’s performance over the last three months or year—can provide valuable insights. SCHW shares have appreciated by 12.57% over the last quarter and by 26.61% over the past year. To put this in perspective, the S&P 500 Index has only moved 3.62% and 26.55% over the same time periods, respectively.

Another vital factor to consider is SCHW’s average 20-day trading volume. Trading volume serves various purposes, with the 20-day average establishing a reliable price-to-volume benchmark. A rising stock accompanied by above-average volume typically signals bullish sentiment, while a declining stock with high volume usually indicates bearish trends. Currently, SCHW is averaging 6,598,758 shares traded over the last 20 days.

Earnings Forecast

The Zacks Momentum Style Score includes multiple components, such as earnings estimate revisions and a stock's price performance. Earnings estimates play a vital role in the Zacks Rank, and favorable revisions can positively influence a stock’s outlook. SCHW has recently benefited from this dynamic.

In the past two months, 9 earnings estimates for SCHW have been revised upward, while only 1 has been downgraded for the full year. These updates have elevated SCHW's consensus earnings estimate from $3.86 to $4.04 within the last 60 days. Looking ahead to the next fiscal year, 7 estimates have seen upward revisions, while only 1 estimate has been marked down in the same timeframe.

Conclusion

Considering these factors, it's clear why SCHW holds a #2 (Buy) rating and an impressive Momentum Score of A. If you’re in the market for a promising stock that appears poised for growth in the near future, The Charles Schwab Corporation should certainly be on your radar.

investing, momentum, stocks