Trust your eyes, not your ears

Trust your eyes, not your ears.

– Zack

Financial markets have changed over the years, but one thing has remained the same: human behavior. Institutions as well as individual investors buy and sell stocks based on a multitude of different strategies, but all the reasons a stock goes up or down can be summed up by comparing the pressure to buy a stock to its price. sales pressure. Ultimately, if more stocks are bought at higher consecutive prices, the stock will rise. If more stocks are sold at lower prices, the stock will go down.

Everything else is noise. The financial media is teeming with uninformed opinions and “experts” who claim to know for sure where the stocks are going. The truth is, no one knows for sure what will happen in the future, and anyone who tells you otherwise is not trustworthy.

If we can quantitatively measure the buying pressure of a stock versus its selling pressure, we can know in advance which direction the stock is heading. likely to move. This is very different from to predict what direction a stock will take. In the investment world, predictions can get you into a whole world of trouble. We’re not here to make predictions – we’re here to make money.

Amateur investors will naively create reasons why a particular stock is worth buying, for example “the stock is cheap” or “this stock was beaten recently and it is time for a turnaround. The problem with this type of crystal ball approach is that these investors are trying to predict the future. We can compare this with the attempt to catch a falling dagger. You’d rather let it touch the ground than reach out and hope to grab the handle, right? Investing is no different. A safer approach would be to allow a security to bottom out, show signs of a reversal and stabilize in position.

The most effective way to measure buying and selling pressure is to visualize the daily price movement of a stock using price charts. Price charts are a fantastic tool for visualizing the price trend of a stock, and it is this price trend that will help us make buying and selling decisions. It is mind boggling that even today some professional money managers do not use charts to manage their money. Investing without using cards is like throwing darts at a blindfolded dart board – they are almost certain to fail! Even if they hit the plateau, they will most likely be far from the target.

Human behavior dictates market movement – it always has and always will. And human behavior hasn’t changed much throughout history. Greed, hope and fear are human emotions that find their way into buying and selling decisions. Graphic diagrams are the effect of these decisions. As investors, we want to identify the strongest stocks that are in the most powerful uptrends, which is a clear indication that the buying pressure is outstripping the selling pressure.

In addition to viewing price trends, Zacks charting software offers investors the ability to overlay consensus earnings estimates and EPS surprises on the price trend, allowing them to see the whole picture. investment. Over time, stocks generally follow the direction of profits. Our Zacks Rank system helps investors identify stocks experiencing positive earnings estimate revision activity before significant price movements.

With this in mind, let’s identify three restaurant stocks whose buying pressure exceeds selling pressure and whose profits have grown steadily over time. All three stocks are part of the Zacks Retail and Wholesale sector, which is ranked # 2 out of 16 sectors.

Yum! Trademarks, Inc. (YUM)

Yum! Brands develops, operates and franchises quick service restaurants around the world. YUM is the world’s largest catering company in terms of system units with more than 50,000 restaurants in more than 150 countries and territories. YUM’s best-known brands – KFC, Pizza Hut, and Taco Bell – are the world leaders in chicken, pizza and Mexican-style food categories. The company was founded in 1997 and is headquartered in Louisville, KY.

YUM has taken innovation to a new level with the acquisition of Dragontail, an integrated AI-based kitchen order management and delivery technology that continues to attract new customers. The company currently reports in four segments – KFC (40.2% of total revenue in 2020), Taco Bell (36%), Pizza Hut (17.7%) and Habit Burger Grill (6.1% ). While revenues were hit in 2020 due to the pandemic, growth resumed in 2021. Revenue is expected to have jumped 16.34% last year to $ 6.58 billion, and the consensus estimate of Zacks for 2022 forecasts growth of 7.56% to $ 7.07 billion. .

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YUM has beaten earnings estimates in each of the past seven quarters. The company published a surprise average profit over the last four quarters of + 19.81%. YUM recently announced EPS of $ 1.22 in October, up 15.09% from consensus. YUM shares have risen 31% in the past year.

Yum Brands, Inc. Price, Consensus, and Surprise EPS

Yum Brands, Inc. Price, Consensus, and Surprise EPS

Zacks’ consensus estimate for 2021 BPA stands at $ 4.50, which translates to 24.31% growth from 2020. YUM is expected to release its next earnings report on February 3.e.

McDonalds Corp. (MCD)

McDonald’s is the world’s largest foodservice retailer. The company’s international system includes both company-owned and franchise restaurants with more than 39,000 locations in more than 100 countries. Almost 93% of MCD restaurants are owned and operated by independent local businessmen and women. McDonald’s was founded in 1940 and is headquartered in Chicago, Illinois.

A strong driving presence and investments in delivery and digitization over the past few years have helped the company tackle the pandemic. The brand’s strong notoriety has enabled it to conquer nearly 10% of the global informal restaurant market. Notably, the company’s recently launched loyalty program in the United States has already enrolled more than one million members. MCD currently has loyalty programs in France and Germany with over 15 million active loyalty members earning rewards.

Company expansion efforts continue to drive performance. MCD has beaten earnings estimates in each of the past three quarters and recently released EPS for the quarter ending September 2021 of $ 2.76, a + 12.2% surprise from consensus. The company has averaged a + 6.8% positive earnings surprise over the past year, contributing almost 30% of the stock’s return over that time frame.

McDonald’s Corporation price, consensus and EPS surprise

McDonald's Corporation price, consensus and EPS surprise

Zacks’ Consensus Estimate for 2021 EPS has been revised up 0.43% over the past 60 days to $ 9.42 – a staggering 55.7% growth rate from 2020. MCD is due release its latest set of ’21 quarterly results later this month on January 27e.

Papa John’s International, Inc. (PZZA)

Papa John’s operates and franchises pizza deliveries, take-out restaurants, and restaurants in the United States and internationally. PZZA is the third largest pizza delivery company in the world and operates 5,569 restaurants, including 591 company-owned restaurants and 4,978 franchised restaurants in 50 countries and territories. Papa John’s was founded in 1984 and is headquartered in Louisville, KY.

A combination of product innovation, successful partnerships, international expansion and franchising initiatives have helped PZZA revenue surpass pre-pandemic highs. The company successfully hired 30,000 new team members during the fourth quarter of 2020. Papa John’s continues to expand its digital ordering capabilities with the launch of Facebook Instant Ordering as well as a custom ordering app for Apple TV . Total revenues are expected to have increased by 13.81% in 2021.

Zacks investment researchImage source: Zacks Investment Research

The PZZA has beaten earnings estimates in each of the past three quarters while averaging a positive surprise of 27.2% over the past year. The company recently reported EPS of $ 0.83 in November, a surprise of + 20.29% from consensus. PZZA shares have outperformed the market over the past year with a return of 37.46%.

Papa John’s International, Inc. Price, Consensus and Surprise EPS

Papa John's International, Inc. Price, Consensus and Surprise EPS

What the Zacks model reveals

Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate review activity. This newer information can be very accurate and give investors a head start during earnings season. In fact, by combining a rank 3 of Zacks or better with a positive earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.

With a Zacks # 3 ranking and an ESP of + 7.24% earnings, PZZA’s earnings trend looks set to continue. Profits are expected to have climbed 142.14% in 2021 to $ 3.39. PZZA Expected to Release Final List of ’21 Quarterly BPAs on February 24e.

These three long-term winning restaurants prove that keeping up with company earnings and price charts can guide investors to stocks that are outperforming the market.

Zacks names “best single choice to overtake”

Among thousands of stocks, 5 Zacks pundits each chose their favorite to soar + 100% or more in the coming months. Of these 5, research director Sheraz Mian chooses one to have the most explosive advantage of all.

As one investor put it, “Cure and prevent hundreds of diseases… what should this market be worth? This company could compete with or surpass other recent Zacks stocks which are expected to double as Boston Beer Company which climbed + 143.0% in just over 9 months and NVIDIA which climbed + 175.9% in one. year.

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Eleanor C. William