Despite Fast-Paced Momentum, Redfin Is Still a Bargain Stock

Momentum investing is essentially the opposite of the tried-and-tested Wall Street adage -- "buy low and sell high." Investors following this investing style typically avoid betting on cheap stocks and waiting long for them to recover. They believe instead that one could make far more money in lesser time by "buying high and selling higher."

Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, investors find themselves loaded up on expensive shares with limited to no upside or even a downside. So, going all-in on momentum could be risky at times.

A safer approach could be investing in bargain stocks with recent price momentum. While the Zacks Momentum Style Score helps identify great momentum stocks by paying close attention to trends in a stock's price or earnings, our 'Fast-Paced Momentum at a Bargain' screen comes handy in spotting fast-moving stocks that are still attractively priced.

There are several stocks that currently pass through the screen and Redfin RDFN is one of them. Here are the key reasons why this stock is a great candidate.

Investors' growing interest in a stock is reflected in its recent price increase. A price change of 28.7% over the past four weeks positions the stock of this real estate broker well in this regard.

While any stock can see a spike in price for a short period, it takes a real momentum player to deliver positive returns for a longer time frame. RDFN meets this criterion too, as the stock gained 40.1% over the past 12 weeks.

Moreover, the momentum for RDFN is fast paced, as the stock currently has a beta of 2.66. This indicates that the stock moves 166% higher than the market in either direction.

Given this price performance, it is no surprise that RDFN has a Momentum Score of B, which indicates that this is the right time to enter the stock to take advantage of the momentum with the highest probability of success.

In addition to a favorable Momentum Score, an upward trend in earnings estimate revisions has helped RDFN earn a Zacks Rank #2 (Buy). Our research shows that the momentum-effect is quite strong among Zacks Rank #1 and #2 stocks. That's because as covering analysts raise their earnings estimates for a stock, more and more investors take an interest in it, helping its price race to keep up.

Most importantly, despite possessing fast-paced momentum features, RDFN is trading at a reasonable valuation. In terms of Price-to-Sales ratio, which is considered as one of the best valuation metrics, the stock looks quite cheap now. RDFN is currently trading at 0.93 times its sales. In other words, investors need to pay only 93 cents for each dollar of sales.

So, RDFN appears to have plenty of room to run, and that too at a fast pace.

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