These Consumer Stocks Recently Hit a 52-Week High, Is It Time to Buy or Sell?

Author: Craig Adeyanju

Estimated read time: 3 minutes

Publication date: 15th Oct 2019 11:45 GMT+1

When stocks hit new highs, it could be a sign that the stock has been undervalued and that the market is gradually realizing this. It could also be as a result of investors giving fallaciously high valuations to stocks, which means it might be the best time to sell. The ability to know which one is the case and executing trades accordingly can be telling when looking at portfolio returns.

We used the Finscreener Opportunity Screener to identify some S&P 500 consumer stocks that recently hit a new 52-week high and evaluate if it's time to buy these stocks or sell them. The Finscreener Opportunity Screener reports changes on a host of important stock metrics (volume, dividend, analyst ratings, price movements, etc.) that may help investors make educated decisions.

Target Corporation

Market Capitalization: $57.32 billion

Year-To-Date Performance: 69.21%

American retailer Target Corp. (NYSE: TGT) hit a new 52-week high of $112.94 per share on Oct. 11. That was the second time the stock would hit a new 52-week high in the space of a week. TGT stock, which belongs in the consumer defensive sector, a sector known for performing well even in recessions, is benefitting from the bullishness that the stock will have a stellar holiday season.

The retailer has also surpassed Wall Street earnings estimates over the last two quarters, reporting earnings that are 13.04% higher than expectations in the most recent quarter. The stock carries a Strong Buy earnings rating, with its PE ratio of 18 more attractive than nearly 78% of its industry.

Walmart Inc.

Market Capitalization: $342.08 billion

Year-To-Date Performance: 29.08%

Walmart Inc. (NYSE: WMT) largest retailer in the world high new 52-week highs twice in the week ended Oct. 11, the most recent being the price of $120.71 per share on Oct. 11. Like TGT, WMT stock belongs in the consumer defensive sector.

The most obvious explanation for the stellar year that WMT stock has enjoyed its impressive run of earnings outperformance. Walmart has exceeded Wall Street earnings expectations for six consecutive quarters, surpassing expectations by 4.10% in its most recent quarter and 10.79% in the preceding quarter. Walmart is expected to have another great end to the year owing to how the holiday season is historically favorable for retailers.

The caveat, however, is that WMT PE ratio of 25.50 is better only marginally more attractive than its industry average of 26.67. Still, it currently carries a Strong Buy earnings rating.

The TJX Companies Inc.

Market Capitalization: $70.84 billion

Year-To-Date Performance: 30.91%

On Oct. 11, TJX Companies (NYSE: TJX) hit a new 52-week high for the second time in a week, the previous coming on Oct. 10. The most recent 52-week high was $59.15 and the previous being $57.48 per share. TJX stock belongs in the cyclical consumer sector, which is known to be affected by changes in the economic cycle.

With regards to earnings and earnings ratios, TJX stock isn't as attractive as TGT and WMT. While TJX has reported better-than-expectation earnings in four of the last six quarters, it only managed to match consensus expectations in its most recent quarter. Also, its PE ratio of 21.90 is significantly higher than its industry average of 12.18.

What's more, the current economic uncertainties make TJX a risky proposition at the moment. It might be time to sell TJX stock.

In addition to avoiding TJX stock, you might want to avoid these industries, as economic uncertainties linger.


Disclaimer: Craig Adeyanju is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.