Relative Strength: 3 Stocks Outperforming High-Flying Tech

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The technology sector has delivered remarkable gains over the last year, with easing costs and an overall more favorable operating environment providing favorable tailwinds.

While the gains have undoubtedly been impressive, there have been several non-technology stocks – e.l.f. Beauty (ELF), Abercrombie & Fitch (ANF), and Builders FirstSource (BLDR) – have all outperformed the Zacks Technology sector over the last year, as we can see below.

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In addition to strong price action, several currently sport a favorable Zacks Rank, reflecting upward trending earnings estimate revisions among analysts. Let’s take a closer look at each.

e.l.f. Beauty

e.l.f. Beauty is a cosmetics company, with its products primarily consisting of face makeup, eye makeup, lip products, nail products, and cosmetic kits. The stock is a Zacks Rank #2 (Buy), with earnings expectations moving higher across the board.

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The company’s robust growth has fueled its share performance, with quarterly revenue of $271 million throughout its latest period jumping 85% year-over-year. Sales growth has been driven by continued business momentum and a stronger-than-expected consumer.

Zacks Investment Research

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Shares trade at steep multiples, reflective of its expected growth and perhaps steering value-conscious investors away. The current forward earnings multiple (F1) of 56.6X is undoubtedly expensive but remains below the 67.4X five-year median.

Abercrombie & Fitch

Abercrombie & Fitch operates as a specialty retailer of many types of premium, high-quality casual apparel for men, women, and kids through a vast store network. The company’s earnings outlook has increased considerably, landing it into a favorable Zacks Rank #1 (Strong Buy).

Zacks Investment Research

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The company’s growth is notably strong, with consensus expectations for its current fiscal year suggesting 2300% earnings growth on 15% higher sales. As mentioned earlier, a less costly operating environment has led to a jump in profitability.

Share performance has been supported by better-than-expected quarterly results, moving higher post-earnings in three consecutive releases.

Zacks Investment Research

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Builders FirstSource

Builders FirstSource supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers.

Perhaps to the surprise of some, BLDR shares have been considerably strong performers over the last decade, providing a remarkable 36% annualized return over the period compared to the S&P 500’s respective 13%.

Zacks Investment Research

Image Source: Zacks Investment Research

Growth is expected to taper in its current year, with consensus estimates for FY23 suggesting a 26% pullback in earnings on a 25% revenue decline. The company benefited nicely from higher building costs in recent years, with FY22 revenue of $22.7 billion 165% higher than the $8.6 billion mark in FY20.

Bottom Line

While technology stocks continue to dominate headlines thanks to their strong performances, the sector hasn’t been alone in producing big-time winners over the last year.

All three stocks above – e.l.f. Beauty, Abercrombie & Fitch, and Builders FirstSource – have all outperformed the Zacks Technology sector over the last year.


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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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