Earnings and earning-related news is the number one catalyst for stock movement. A strong quarter can dictate the direction of a stock for the following three months as can a bad quarter; in the past I have written in detail about such subjects, a domino effect like reaction following a strong quarter. Therefore, I am looking at a few stocks that could continue to trade higher after strong earnings, and present a domino effect trend with long-term gains.
Shares of Michael Kors Holdings Ltd (NYSE:KORS) traded higher by almost 9% on Tuesday to new all-time highs after reporting earnings. The company posted revenue growth of 70% year-over-year (yoy), beating expectations by almost $100 million and beating the bottom line consensus by $0.23! The company is expanding rapidly, but more important than its expansion was its 41.4% rise in comparable store sales including a 75% rise in North America. This indicates that the company’s growth is not only through expansion, but also growth at existing stores.
In my opinion, Michael Kors has become the perfect momentum stock, one that is fairly valued with a P/E ratio of near 50 and a price/sales of 6.5. To some this may seem expensive, but just compare its fundamental growth to that of other luxury retailers such as Coach; you’ll see it’s not too expensive. The company is growing rapidly and is showing no signs of slowing down, I’d buy!
Small Cap Momentum Stock that is Undervalued
Albany Molecular Research, Inc. (NASDAQ:AMRI) blasted higher by more than 15% after it reported a 44% yoy gain in revenue and almost doubled EPS expectations. The majority of the company’s revenue comes from “contracts”, and this particular segment grew 50% over last year. The margins from this space improved to 18% from 2% last year and now the company is predicting a boost in guidance. This is a very small $200 million company, one that is improving rapidly and is priced cheap with a price/sales of 0.84. The stock has seen large gains over the last year, 120%, but I think it’s very likely that the undervalued stock continues to trade higher. The contributing factor to determine whether or not it will trade higher will be whether or not margins can continue to improve, I think they will.