Despite Fast-paced Momentum, Tree.com (TREE) Is Still a Bargain Stock

Tree.com (TREE), a mortgage lending service provider, is identified as a compelling investment opportunity due to its combination of strong price momentum and attractive valuation. The stock has gained 37.4% in four weeks and 88.8% over 12 weeks, earning a Zacks Momentum Score of A and a Zacks Rank #1 (Strong Buy) driven by upward earnings estimate revisions. Despite this rapid appreciation, TREE trades at a Price-to-Sales ratio of 0.91, indicating it remains a bargain with significant upside potential.

Analysis

Tree.com (TREE) is identified as a strong candidate for a momentum-based investment strategy, supported by significant recent price appreciation and favorable valuation metrics. The mortgage lending service provider's stock has demonstrated robust short-term and medium-term performance, with a 37.4% gain over the past four weeks and an 88.8% increase over the last twelve weeks. This upward trend is underpinned by positive analyst sentiment, evidenced by a Zacks Rank #1 (Strong Buy), which is attributed to an upward trend in earnings estimate revisions. Despite this rapid price increase, the stock maintains an attractive valuation, trading at a Price-to-Sales (P/S) ratio of 0.91. This suggests the company is valued at less than its annual revenue, a metric that points to potential undervaluation. Furthermore, the stock's beta of 1.69 indicates it is significantly more volatile than the broader market, offering the potential for amplified gains but also exposing investors to higher risk.

Key Decisions for Investors

• Investors with an appetite for growth and higher risk may find TREE attractive, as it combines strong, fundamentally-backed momentum with a valuation that appears inexpensive at a 0.91 Price-to-Sales ratio.
• The high beta of 1.69 signals significant volatility, so any position should be sized appropriately to account for potential price swings that are 69% greater than the market average.
• The bull case relies heavily on continued positive earnings estimate revisions, so investors should monitor analyst ratings and the Zacks Rank for any downgrades that could signal a reversal in fundamental trends and momentum.