If you’ve had a chance to follow some of my recent Trade of the Day articles, you know that I like to focus on lesser-known stocks that have bigger potential and are in the sweet spot to profit from next-generation themes and trends. The last couple have done well, so I have a new idea for you today in an undervalued growth stock that is also setting up well technically.
The company is Blucora (NASDAQ:BCOR), which is a technology company that provides financial solutions for small business owners, tax professionals, and consumers. One division concentrates on tax preparation and operates TaxAct.com; the other division is involved with wealth management services for financial advisors.
There’s no doubt about the growth, which is why the stock is up 200% over the last 12 months. Earnings per share are expected to increase nearly 50% from $1.06 last year to $1.56 by 2018. The PEG ratio (price-earnings/growth) is an eye-popping 0.70X. That is very undervalued. For context, anything under 1.0 is considered undervalued, and it is tough to find those stocks in this market near all-time highs.
Now, on to the chart to look at BCOR’s appeal as a trade. The stock has been in the midst of a strong uptrend over the last six months that has included above average volume. That is critical. When a stock is rallying, it is important to have volume behind the move to validate the higher prices.
After hitting a multiyear high in March, BCOR has drifted lower by about 5% — and here’s the key — on volume that was less than the rally. The lighter volume indicates that the sellers did not take control of the stock. The buyers are simply taking a breather, which is healthy. Also important, the stock found support at the uptrend line (which I’ve drawn below) as well as the 50-day moving average (orange line).
BCOR is a combination of strong fundamentals and bullish technicals, and it is a Next Gen Internet stock. It’s a good trade right now, and it’s one to consider for the longer-term as well. (There are some very stocks with big potential in the whole tech trend of Software-as-a-Service, and you can read about some of my favorites at my MoneyWire website.)
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.