Fast-paced Momentum Stock ScanSource (SCSC) Is Still Trading at a Bargain

The article outlines an investment strategy targeting "bargain stocks with recent price momentum" to mitigate the risks of traditional momentum plays. ScanSource (SCSC) is presented as a prime example, exhibiting significant recent price appreciation (3.4% in 4 weeks, 11.5% in 12 weeks) and a high beta (1.43), alongside an attractive valuation at 0.33x Price-to-Sales and a Zacks Rank #2 (Buy) driven by upward earnings estimate revisions. This combination suggests SCSC, and similar stocks identified by this screen, offer compelling upside potential by balancing strong momentum with valuation discipline.

Analysis

The provided analysis from Zacks Investment Research advocates for a 'momentum at a bargain' strategy, using ScanSource, Inc. (SCSC) as a prime example. The thesis posits that SCSC combines strong price momentum with an attractive valuation, mitigating the risks of investing in over-extended momentum stocks. Key supporting metrics include a 3.4% price increase over the last four weeks and an 11.5% gain over the past 12 weeks, which are coupled with a high beta of 1.43, indicating the stock moves 43% more than the broader market. This momentum is further validated by a Zacks Momentum Score of 'B'. Crucially, the 'bargain' element is supported by a Price-to-Sales (P/S) ratio of 0.33, suggesting the stock is inexpensive relative to its revenue. The bullish outlook is reinforced by a Zacks Rank #2 (Buy), which is attributed to an upward trend in earnings estimate revisions, a factor believed to attract increasing investor interest and drive price appreciation.

Key Decisions for Investors

• Investors employing a growth-at-a-reasonable-price (GARP) or momentum-driven strategy may find SCSC's combination of recent price performance, a low 0.33x P/S valuation, and positive earnings revisions to be a compelling long opportunity.
• Given the stock's high beta of 1.43, portfolio managers should be mindful of its heightened volatility and potential for amplified losses in a market downturn, making position sizing a key consideration.
• The investment case is heavily reliant on the continuation of positive catalysts, therefore it is critical to monitor for sustained upward earnings estimate revisions and any significant expansion of the P/S multiple that could erode the 'bargain' component of the thesis.