The Momentum Rank is based on a composite of price and earnings momentum. Both of these are weak in the case of BlueScope Steel (ASX:BSL). Its 6m and 12m relative strength is +1.32% and -15.4% respectively. Its EPS Estimates have been on a downward trend since March 2022 for both 2023 & 2024.
What would be the likely reasons for its high Momentum Ranking of 86?
First Wonga, I just want apologise for the delay in responding to this. Chris and I are still on our "L-plates" with regards to support and I missed this.
Without access to the raw calculation I cannot definitively say, however I suspect that it will have something to do with the price momentum. Your assertion regarding earnings momentum is correct and we commented on that with our recent Australian NAPS review which you can read here if you haven't already.
You are also correct that the absolute price performance has not been strong. But on a relative basis it hasn't been that bad.
Remember the rating system is based on how well the metric has performed relative to the broader market index.
So using the above image from BSL, you can see on a 1m basis BSL underperformed the index by -1.58%. However we compare that number against the performance of all other stocks against the index and we see that it is in the middle of the range (as denoted by the yellow dot). I would suggest it is at the higher end of the middle range given December was a terrible month for companies that weren't BHP and the Banks. Full stop.
You will notice in the image that we add coloured dots to the raw numbers. This is to provide context as to where the number sits relative to peers in the market. The fact there are so many green dots suggests why the Momentum rank is as high as it is. Even if a number is negative, if it is better than its peers, then it will rate highly for that element.
Hopefully this explanation goes someway to explaining the model and again, apologies for not responding sooner. In future if you submit a direct question through our chat system (click on the green comment box in the bottom right hand corner) we will capture it within our internal system, and can respond to you more promptly. Regards, Elio.
Hi Elio, there's nothing to apologise for. I am just glad that there is local support and you can agree how important this is for subscribers to get the best out of Stockopedia.
Thank you for the thorough explanation. The main takeaway for me is to understand the difference between Momentum and Relative Strength. I like to buy trending stocks and just because a stock has a high Momentum score, it doesn't necessarily mean its price has been trending. I have found that screening for stocks with both high Momentum and Relative Strength scores as well as high Stock Rank scores give me the kind of trending stocks I look for.
I am glad you also explained the colour dots - now I know what they mean. Regards, Wonga.
