7 Green Days In A Row: Imperial Oil Stock Is Up 8.6%

A sustained run in Imperial Oil has investors looking closer at whether the company's fundamentals justify the new attention.

A seven-day run in Imperial Oil (IMO) stock has added about $5.2 billion to the company's market value. The stock has now moved higher for 7 consecutive trading days, a period that has delivered a cumulative gain of 8.6% for shareholders.

That streak brings the company's total market value to about $66 billion. The move has been powerful enough to push the stock near its 52-week high.

The Streak Next To The S&P 500

Here is how IMO stock stacks up against the S&P 500 over the streak and the periods around it:

Is there fundamental support for this run?

The move appears specific to the stock; over the same 7 trading days, the S&P 500 returned -0.8%. The market may be weighing a valuation that is not demanding. IMO trades at a price-to-earnings multiple of 15.8, compared to an S&P 500 median of 23.2, and its free cash flow yield is 7.7%.

That said, its recent growth and margins trail the broader market. Revenue over the last twelve months grew 7.0%, against an S&P 500 median of 8.4%, while its operating margin of 10.4% compares to a median of 18.4%.

What is the disciplined way to view a streak?

A streak is a piece of information, not a command. It signals that other investors are paying attention, but it makes no promises about the next move. The disciplined response is to use the new price as a prompt to re-evaluate the underlying business.

After a twelve-month return of +65.9%, the stock now trades at about $135.7 a share, near its 52-week high of $137.64. The question is whether the company's fundamentals still support the price the market is now asking.

A run like this is worth respecting, and worth testing: the momentum that lasts is usually the kind management itself is underwriting. Our Guidance Momentum screen tracks the stocks whose companies just raised their own forward numbers.

And for anyone who would rather back the theme than one company's story, an oil and gas ETF like XOP holds the sector rather than this one name. It is still a concentrated bet on that one theme, though, which is exactly the gap the portfolio below closes.

One Hot Stock Is A Story. Thirty Sound Ones Are A Strategy

A streak like this earns a place on your watchlist, and it also earns a question: how much of your outcome do you want depending on one company keeping this up?

The Trefis High Quality (HQ) Portfolio answers it with breadth: roughly 30 businesses picked for consistent cash generation, strong margins, and balance-sheet strength, sized and rebalanced by rules. It has a track record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. Follow the story; invest in the strategy.