Three Companies With Earnings that Could See Continued Gains

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Investors often try to trade stocks with large single-day gains in hopes of quick gains. However, these large one-day pops can often be more than just opportunities for single-day gains; they can sometimes be a change in the trend of a company due to significant company developments. With that being said, I am looking at Thursday’s biggest earning surprises,  and I am determining if the performance might present further opportunity for investors.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>Gains</p> </td> </tr> <tr> <td> <p><strong>Rite Aid</strong></p> </td> <td> <p><span class="ticker" data-id="217285">(NYSE: <a href="http://caps.fool.com/Ticker/RAD.aspx">RAD</a>)</span></p> </td> <td> <p>16.35%</p> </td> </tr> <tr> <td> <p><strong>Steelcase</strong></p> </td> <td> <p><span class="ticker" data-id="205383">(NYSE: <a href="http://caps.fool.com/Ticker/SCS.aspx">SCS</a>)</span></p> </td> <td> <p>12.23%</p> </td> </tr> <tr> <td> <p><strong>CarMax Group</strong></p> </td> <td> <p><span class="ticker" data-id="204181">(NYSE: <a href="http://caps.fool.com/Ticker/KMX.aspx">KMX</a>)</span></p> </td> <td> <p>8.95%</p> </td> </tr> <tr> <td> </td> <td> </td> <td> </td> </tr> </tbody> </table>

Rite Aid

Rite Aid posted its first quarterly profit in more than five years, and therefore led the market in performance. The company has been at the epicenter of bankruptcy rumors, but has slowly managed to improve and become more efficient as a company. Rite Aid did see a slight fall in revenue due to cheaper generics. However, the company has more than $26 billion in revenue over the last 12 months, making its $1.08 billion market cap look very cheap.

If this company can continue to fundamentally improve with profits, then it could become one of the market’s best performers for many years to come. This is a definite turn of the corner, and a reason to buy the news.

Steelcase

Shares of furniture company Steelcase rallied after posting a strong quarter, beating both top and bottom line expectations. Yet despite it being above expectations, it was still only a slight beat. Yet because investors had expected possible weakness the stock took off higher.

The company remains undervalued and continues to post strong margin growth quarter after quarter. It is trading with a price/sales of just 0.51 and a forward P/E ratio of just 12.68, indicating great value if growth can continue. Therefore, this is a company worthy of your due diligence and might trade considerably higher.

CarMax

CarMax announced what I believe is a very strong showing of continued strength in the auto industry with its Q3 earnings report. Meanwhile, it also posted a significant beat over top and bottom line expectations. The company continues to have compelling credit offers on the table and saw units rise by 16%.

In terms of valuation the company is now at 52-week highs, but is not overvalued. The stock trades with a forward P/E ratio of just 18.8 and a price/sales ratio of 0.76. Therefore, I believe it’s worth your due diligence and might be a great addition as a stock that could trend significantly higher.

Earnings often dictate the trend of a stock for the following three months. It is the last impression that investors have of both upcoming and current strength. Therefore, strong performance can take shares higher, especially if a stock is fairly or undervalued. Each of the companies on this list fall into this category, and might become pleasant surprises in the three months that follow. 

 


BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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