Shares of auto parts and services chain Advance Auto Parts shot up nearly 70% in less than five months. On Wednesday, the Relative Strength (RS) Rating for Advance Auto stock leapt from 68 to 80.
The rating upgrade puts Advance Auto stock on the cusp of joining an elite group of stocks. Market research shows that the best stocks often have an RS Rating above 80 in the early stages of their moves.
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Advance Auto Stock Hot, Fundamentals Need Work
However, the stock watchlist candidate has struggled on earnings and posted feeble revenue growth over the past year. Additionally, even with its recent stock surge it remains well below its all-time high above 244, set in January 2022.
Advance Auto stock rose from a 47.99 intraday low on Oct. 24 to close just below 80 Monday afternoon, up 1.8% for the day and about 68% above the October low. Additionally, it closed higher on 10 of the last 12 trading days and it's a healthy distance above its 21-day, 50-day and 200-day lines.
What's driving this recent surge? In part it's because the Raleigh, N.C.-based company reached an agreement with activist hedge fund Third Point, according to a Monday Wall Street Journal report. Under terms of the accord, three Third Point-backed directors will be appointed to the Advance Auto Parts board. Third Point also took a stake in the company and says it wants to help it grow at a faster pace.
Among its other ratings Advance Auto stock has a mediocre 51 Composite Rating and a weak 6 Earnings Per Share Rating out of 99.
Big Money Investors See Potential
Meanwhile, big money investors like insurance company funds and ETFs see potential in the stock. It boasts an A Accumulation/Distribution Rating on an A+ to E scale with A+ superb and E worst. The A rating shows heavy buying.
The company reported a 59-cents per-share loss in its latest quarter on flat sales growth at $2.465 billion. The prior three quarters it reported losses but it also saw small increases in revenue for those same periods.
Advance Auto stock has moved more than 5% past a 66.04 entry in a first-stage flat base, meaning it's now out of a proper buy range. Look for the stock to offer a fresh chance to get in like a three-weeks tight or pullback to the 50-day or 10-week moving average.
Advance Auto Parts earns the No. 7 rank among its peers in the 11-stock Retail/Wholesale-Auto industry group. Valvoline, Copart and AutoZone are among the top 5 highly rated stocks within the group.
IBD's proprietary Relative Strength Rating measures technical performance by showing how a stock's price movement over the last 52 weeks compares to that of the other stocks in our database. Look for Advance Auto stock to top that key metric.
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