An important question for large-cap investors right now is whether the current market uncertainty caused by Covid-19 will affect the share prices of companies like Coca Cola HBC AG (LON:CCH).
Coca Cola Hbc Ag shares are currently trading at 2294. To predict how the price will move over the next 12 months, it's worth assessing its ability to withstand economic shocks and ride out market volatility.
No-one has a crystal ball, but research shows that stocks that are good quality and have strong momentum can be better placed to handle these kinds of challenges. That's because resilient, cash-generating businesses can be good at compounding investment returns over time. And research suggests that positive trends in price and earnings can often persist.
The promising news is that Coca Cola Hbc Ag scores well against some important financial and technical measures, and has signs of exposure to both high quality and strong momentum.
Why quality can pay off
When it comes to stock analysis, company quality tends to be revealed in high profitability and strong industry-leading margins. These kinds of firms are stable, growing and often have accelerating sales and earnings. They also have strong and improving financial histories with no obvious signs of accountancy or bankruptcy risk.
One of the quality metrics for Coca Cola Hbc Ag is its 5-year Return on Capital Employed, which is 12.0%. Long-term, double-digit ROCEs can be a hallmark of companies with the power to grow very profitably.
Harnessing the power of momentum
Positive momentum trends show up in share prices and earnings growth. You can find the clues in stocks that are trading close to their 52 week high prices and outperforming the market. They’ll often be beating broker estimates and getting forecast upgrades and recommendation changes.
There are signs of this at Coca Cola Hbc Ag, where the share price has seen a 0.053% return relative to the market over the past 12 months. Market volatility and economic uncertainty can be a major drag on momentum, but previously strong stocks can be quick to recover when confidence returns.
In summary, a combination of high quality and momentum can be clues in the search for shares with the potential to deliver solid investment profits over many years.
In good times, these shares can become expensive to buy. But in volatile markets, there may be chances to buy them at cheaper prices.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.