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

Momentum investing is essentially an exception to the idea of "buying low and selling high." Investors following this style of investing are usually not interested in betting on cheap stocks and waiting long for them to recover. Instead, they believe that "buying high and selling higher" is the way to make far more money in lesser time.

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.

Empresa EDN is one of the several great candidates that made it through the screen. While there are numerous reasons why this stock is a great choice, here are the most vital ones:

A dash of recent price momentum reflects growing interest of investors in a stock. With a four-week price change of 42.1%, the stock of this electric power distributor is certainly well-positioned 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. EDN meets this criterion too, as the stock gained 55.6% over the past 12 weeks.

Moreover, the momentum for EDN is fast paced, as the stock currently has a beta of 1.39. This indicates that the stock moves 39% higher than the market in either direction.

Given this price performance, it is no surprise that EDN has a Momentum Score of A, 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 EDN 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, EDN 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. EDN is currently trading at 0.54 times its sales. In other words, investors need to pay only 54 cents for each dollar of sales.

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

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