The data item is a percentile ranking (ranking between 0 -100) of the stock, against all other stocks in the country, based on recent valuation as well as price momentum of the stock. The rank is calculated taking into consideration 2 different factors:
- Valuation of the stock : Valuation of a stock refers to an attempt to understand the true worth of the stock. Valuation is done taking into consideration the expected future growth of the company vis a vis its historical growth as well when compared to expected industry growth.
- Momentum of the stock : Price momentum is the rate of change in price of a particular stock. Momentum investing is a strategy that tries to understand the existing trend in the market and attempts to capitalize on the same. So if a momentum investor feels that the bull run in the market will continue he/she will buy stocks whose prices are increasing in order to benefit from the trend.
A company might be trading at discount to the sector either because the stock’s future earnings potential are low or because market has not noticed its earnings potential and hence there is a temporary pricing mismatch. Combination of valuation and momentum factors, in the above data item, helps differentiate between stocks that are undervalued due to fundamental issues and ones that are genuinely undervalued and gaining favour with investors.
Higher the rank, stronger the value momentum of the stock. For example an overall score of 95 indicates that the stock is better than 95% of it’s peers.