Can the Hollywood Bowl share price continue to outperform the market?

Stockopedia’s ‘High Flyers’ are the stock market superstars. These companies tend to be the ones that fund managers jostle and barter over. They are high quality, growing stocks with a history of beating estimates - and Hollywood Bowl (LON:BOWL) is one of them.

Hollywood Bowl is a small cap bowling operator with a portfolio of approximately 50 centers operating across the United Kingdom. When we analyse Hollywood Bowl from a factor perspective, we find that it has a Quality Rank of 92, a Momentum Rank of 93, but a Value Rank of only 37. This is the classic factor profile of a High Flyer.

A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. The higher they rise the harder they fall, after all - and few stocks stay High Flyers for long. Mean reversion is a very real thing and it works like gravity on growth.

What kind of High Flying stock is LON:BOWL?

So, High Flyers tend to be riskier and more volatile than the market average. But is this true of Hollywood Bowl?

We can find out quickly by applying Stockopedia’s RiskRatings system, which splits the stock market into five buckets according to stock price volatility. The five classifications (from least to most volatile) are:

• Conservative (10% of the market)
• Balanced (15% of the market)
• Adventurous (20% of the market)
• Speculative (25% of the market)
• Highly Speculative (30% of the market)

Hollywood Bowl is a adventurous stock. This means that the group is in the riskier half of the market. The fact that the group is on the smaller side, with a market cap of £330m, might further add to this volatility. That said, Hollywood Bowl has a positive one-year relative strength of 5.33%, meaning it has outperformed the market.

Not only that, but we can see from Hollywood Bowl’s above average five-year return on capital employed figure of 12.9% that the group has been highly profitable over multiple years. This suggests that Hollywood Bowl can back up its favourable factor exposures and volatility characteristics with some kind of economic moat.

Find the rockstars of the stock market

High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.

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