Strength of a stock and EPS rank

Discussion in 'Strategy Development' started by tradingbug, Jan 19, 2006.

  1. In a given sector, I see descrepancies between a stocks EPS rank and its corresponding RS rank. I was wondering if anybody could give reasons to how come a stock with a higher EPS rank can have a signiciantly lower RelativeStrength compared to a stock with a lower EPS.

    Does the lower RS of a high EPS rank stock signify a good opportunity if the rest of the sector is on a rise?
  2. =========
    Not necessarly;
    & the same reason no[0,goose egg] earnings per share can outperform SPX & stocks wth any earnings
    = better buy volume....:cool:

    And wisdom is profitable to direct;
    those are merely rough screens ,
    some use sales,
    have timeframes in years, and so on.
  3. The two measures deal with different things. Since they do both are helpful to evaluate for different reasons. Thus you have a broader base of evaluation. That is why the letters are different for each.

    For paragraph 2, no.
  4. doublea


    Looks like you're following CANSLIM. EPS is earnings of the stock whereas RS is compared to S&P. O'Neil's RS is different from the RSI.

    So if the EPS of stock XYZ is increasing by 30% year over year but the price compared to S&P is increasing only 5% year over year, then the EPS and RS will show discrepancy.

    Hope this helps.
  5. Thanks. I will have to look into that as I thought the RS was comparing the stock to the rest of the stocks in the same sector. I am such a newb with this stuff.
  6. No. Assuming that you are talking about CANSLIM, RS and EPS ranks are the proprietary rankings given by the IBD. Low RS ranking when the rest of the sector is on a rise means that the stock is not moving with the sector. It often signals something wrong with the company that is not yet known to the public.
  7. LOL. thanks.

    Essentially, my hope is to chart sectors on a LT Basis so that I may pick the great stocks in each sector that will make nice IT moves.

    I am sure EPS and RS fit into the puzzle somehow. I just need a lot more facetime.
  8. doublea


    I think you're right. It is comparing to the sector and not necessarily the S&P.
  9. As I read over what I had wrote, I realized that it was not clear.

    My hope is to chart sectors on a Long Term basis so that I may pick the best stocks for an Intermediate Term move when the sector breaks out.

    Having a high RS along with EPS to have a broader analysis makes sense. Essentially, I need to know how IBD calculates their RS(next HW assignment).
  10. EPS ranking is a lagged indicator and what matters in the market is forward EPS or projections.
    The IBD approach to calculating EPS ranking has some limitation and you should look at the raw data on EPS along with ranking. Many times the stock will make significant move by the time IBD EPS ranking changes. So the meat of the rally is over by the time it gets the high EPS rank.
    Even though IBD claims its EPS and RS ranking is proprietary, it is not very difficult to figure out how they derive it and with raw data you can create the same ranking. If you search this board you will find formula to calculate RS ranking which will give you exact IBD ranking.
    As to RS it is based on the complete stock universe not based on sector.
    Between the EPS and RS ranking you should favor RS because many times stock move ahead of their earnings or without earnings based on their growth potential.
    #10     Jan 20, 2006