Momentum Stocks Shine While Regional Bank Fades
Two momentum stocks have caught our attention for their strong business execution and positive market sentiment. One of them is Interface (NASDAQ:TILE), a global manufacturer of modular carpet tiles, luxury vinyl tile (LVT), and rubber flooring that specializes in carbon-neutral and sustainable flooring solutions.
The company's incremental sales were extremely profitable over the past two years, with its annual earnings per share growth of 34.1% outpacing revenue gains. Its free cash flow margin increased by 7.5 percentage points over the last five years, giving it more capital to invest or return to shareholders.
Another stock that stands out is Amgen (NASDAQ:AMGN), a biotechnology company that discovers, develops, and manufactures innovative medicines to treat serious illnesses like cancer, osteoporosis, and autoimmune diseases. Its economies of scale give it more fixed cost leverage than its smaller competitors, while its strong free cash flow margin enables it to reinvest or return capital consistently.
However, one stock we are wary of is United Community Banks (NYSE:UCB), a regional bank holding company that provides financial services across the southeastern United States. Its annual revenue growth of 8% over the last two years was below our standards for the banking sector, and its estimated net interest income growth of 2.1% for the next 12 months implies demand will slow from its five-year trend.