Bet on These 5 Top-Ranked Stocks With Rising P/E: Smart, Contrarian, and Timely (2025 Watchlist)
Bet on These 5 Top-Ranked Stocks With Rising P/E: What It Means and Why Investors Are Watching
Meta description: This detailed English rewrite explains why ârising P/Eâ stocks can still be attractive, breaks down the screening strategy, and reviews five Zacks top-ranked names: Allbirds (BIRD), Ardagh Metal Packaging (AMBP), Atlassian (TEAM), Alarm.com (ALRM), and Workhorse (WKHS).
Most investors are taught a simple rule: âBuy low P/E stocks.â The idea sounds logical. If a company earns a lot and its stock price is still cheap, then the stock might be undervalued. But markets arenât always that simple. Sometimes, a rising price-to-earnings ratio (P/E) can be a sign of something positive: growing confidence, improving expectations, and a stock that may be early in a stronger uptrend.
This article is a detailed rewrite and expansion of a market commentary published on December 23, 2025, which highlighted a screen for stocks with rising P/E ratios and strong analyst ranking signals.
What Is the P/E Ratio, in Plain English?
The P/E ratio compares a companyâs stock price to its earnings per share (EPS). A simple way to read it is:
P/E = âHow many dollars investors are paying for $1 of earnings.â
If a stock has a P/E of 30, investors are paying $30 for every $1 the company earns.
Why People Love Low P/E Stocks
Low P/E stocks often feel like bargains. Many value investors believe a low P/E can mean:
- The stock is undervalued
- The market is overly pessimistic
- There may be âroom to runâ if sentiment improves
But Why Would a Rising P/E Ever Be a Good Sign?
Hereâs the twist: A P/E ratio can rise when price increases faster than earnings (or when investors expect earnings to accelerate soon). In many cases, a rising P/E reflects growing optimism about future resultsâlike stronger sales, improving margins, new products, better guidance, or a turnaround story.
In other words, the market may be saying: âWe think this companyâs best days are ahead.â
Why a Rising P/E Can Signal Strength
The logic behind the ârising P/Eâ approach is built on one big market truth: stocks move with expectations. If investors believe earnings will improve, they may buy the stock before those earnings show up in reports. This demand can lift the share price.
The original commentary explained it like this: when earnings forecasts rise and demand stays strong, price can keep climbing, and P/E becomes a clue about how confident investors feel.
A Quick Example Anyone Can Understand
Imagine two companies:
- Company A has a low P/E because people fear its earnings may drop.
- Company B has a rising P/E because investors expect better earnings growth soon.
Company A might look âcheap,â but cheap can stay cheap if problems donât improve. Company B might look âexpensive,â but if earnings grow faster than expected, it can still deliver strong returns. Thatâs why some investors track rising P/E as a momentum-and-expectations signalânot just a valuation number.
The âEarly Breakoutâ Idea
The commentary also noted research suggesting that in strong cycles, some stocks can see their P/E ratios jump dramatically from their breakout point. The practical takeaway is not âbuy anything with a rising P/E,â but rather: catch the move early, before it becomes overheated.
The Screening Strategy Used to Find These Stocks
Instead of guessing, the screen uses a set of rules meant to highlight companies with improving earnings expectations and strengthening price action. Hereâs the strategy, rewritten in clear steps.
Step 1: Look for Earnings Trends That Arenât Falling Apart
- Current-year EPS growth estimate is at least as good as last yearâs actual growth
- Last yearâs EPS change is not negative
These rules aim to avoid companies with collapsing profitability and instead focus on firms with steady-to-improving earnings patterns.
Step 2: Confirm Price Is Rising Consistently
- 4-week price change > 12-week price change
- 12-week price change > 24-week price change
This is a momentum âstair-stepâ check. It looks for a trend that is not only up, but accelerating.
Step 3: Make Sure Itâs Not Just the Whole Market Rising
- 4-week performance vs S&P 500 > 12-week performance vs S&P 500
- 12-week performance vs S&P 500 > 24-week performance vs S&P 500
This tries to identify stocks that are beating the broader market, not just floating up with everything else.
Step 4: Avoid âToo Lateâ Breakouts
- 12-week price change is at least 20% higher than 24-week price change
- But the move should not exceed 100%
The reasoning: a stock that has already doubled may have less upside and could be due for a pullback.
Step 5: Add Quality and Liquidity Filters
- Zacks Rank of #1 (Strong Buy) or #2 (Buy)
- Average 20-day volume of at least 50,000 shares
These rules help focus on stocks with stronger analyst ranking signals and enough trading activity to reduce liquidity risk.
Using these filters, the original screen narrowed a universe of over 7,700 stocks down to roughly 70 namesâand then highlighted five examples.
The 5 Highlighted Stocks With Rising P/E (and Why They Made the List)
Below are the five companies featured in the screen: Allbirds (BIRD), Ardagh Metal Packaging (AMBP), Atlassian (TEAM), Alarm.com (ALRM), and Workhorse Group (WKHS).
1) Allbirds (BIRD) â Lifestyle Footwear and Apparel
Allbirds is described as a lifestyle brand that uses naturally derived materials to make footwear and apparel products. In the screen, it carried a Zacks Rank #2 (Buy).
What stood out in the commentary was its average four-quarter earnings surprise of 18.49%.
Why that matters: Earnings surprises can influence investor confidence. When a company frequently beats expectations, analysts may raise forecasts, and investors may be willing to pay a higher multiple, lifting the P/E.
What investors typically watch next:
- Whether revenue growth is stabilizing or accelerating
- Gross margin trends (are products becoming more profitable?)
- Cash burn and balance sheet strength (especially for turnaround stories)
Main risk to remember: Consumer brands can be sensitive to changing tastes, competition, and economic slowdowns. A rising P/E can reverse quickly if demand weakens.
2) Ardagh Metal Packaging (AMBP) â Recyclable Beverage Cans
Ardagh Metal Packaging was described as a provider of sustainable and infinitely recyclable beverage cans and also carried a Zacks Rank #2.
It had the highest earnings surprise number on the list: average four-quarter earnings surprise of 44.65%.
Why AMBP can show a rising P/E: Packaging businesses can benefit from long-term demand for canned beverages, sustainability trends, and operational efficiency improvements. If investors believe profits will improve more than expected, they may bid the stock up faster than current earnings grow.
Key things investors often track:
- Volume growth in beverage categories (energy drinks, sparkling water, etc.)
- Input costs (like aluminum) and pricing power
- Debt levels and refinancing risks
Main risk to remember: Packaging is competitive and cost-sensitive. If costs rise or volumes disappoint, the âconfidence premiumâ in the P/E can shrink.
3) Atlassian (TEAM) â Collaboration and Workflow Software
Atlassian was described as a global leader and innovator in enterprise collaboration and workflow software. It appeared with a Zacks Rank #2.
Its listed metric: average four-quarter earnings surprise of 20.67%.
Why software often trades at higher and rising P/Es: Software companies can scale efficiently. If sales grow, profits can rise quickly because the cost of delivering software to more customers is relatively low compared to physical products. Investors sometimes pay higher multiples because they expect stronger future earnings growth.
What investors commonly watch for TEAM:
- Cloud migration progress and customer retention
- Expansion revenue (are existing customers buying more?)
- Operating margin trends and cost discipline
Main risk to remember: High-multiple stocks can drop fast when growth slowsâeven if the company is still healthyâbecause the market âre-ratesâ the P/E downward.
4) Alarm.com (ALRM) â Interactive Security Solutions
Alarm.com was described as offering interactive security solutions for home and business owners. It was the only stock on the list with a Zacks Rank #1 (Strong Buy).
Its average four-quarter earnings surprise was listed as 13.98%.
Why a rising P/E might fit here: Security and smart-home services can create recurring revenue and long-term customer relationships. If the market expects steady growth and strong cash generation, it may assign a higher valuation over time.
What investors usually track:
- Subscriber and platform growth
- Churn (how many customers leave?)
- Partner ecosystem strength (dealers, installers, service providers)
Main risk to remember: Competition in smart home and security is intense. Also, if consumer spending slows, new installations can soften.
5) Workhorse Group (WKHS) â Medium-Duty Trucks
Workhorse Group was described as a company engaged in designing, developing, manufacturing, and selling medium-duty trucks. It carried a Zacks Rank #2.
Its listed metric: average four-quarter earnings surprise of 19.89%.
Why a rising P/E can show up in industrial or EV-adjacent names: If investors believe demand is improving, production is stabilizing, or new contracts are possible, the stock price can rise before earnings fully reflect that future story. That can push the P/E higher.
What investors often watch closely:
- Production capacity and delivery targets
- Fleet customer adoption and repeat orders
- Cash runway (how long can the company fund operations?)
Main risk to remember: Vehicle manufacturing is capital-heavy. If execution falls short, the market can lose confidence quickly, and valuation can compress.
How to Read This List the âRight Wayâ (Without Getting Tricked by One Number)
A rising P/E is not automatically good or bad. Itâs a signal. It says the market is willing to pay more for earnings today because it expects better earnings tomorrow. That expectation can be rightâor wrong.
Three Helpful Checks Before Taking Any Stock Screen Seriously
- Check the âwhyâ behind the rising price: Is it earnings improvements, a new product, or just hype?
- Confirm fundamentals: Revenue trends, margins, and cash flow matter more than a single ratio.
- Look for risk triggers: Debt, dilution, competition, or weak guidance can flip sentiment fast.
Important note: This article is for education and news-style explanation. It is not financial advice or a recommendation to buy or sell any security.
Frequently Asked Questions (FAQs)
1) What does ârising P/Eâ actually mean?
It usually means the stock price is rising faster than earnings right now, often because investors expect stronger future earnings growth.
2) Isnât a high P/E always bad?
No. A high (or rising) P/E can reflect high expected growth, strong competitive advantages, or improving confidence. But it can also mean a stock is overheated, so context matters.
3) Why does earnings surprise matter in this screen?
Companies that frequently beat expectations may get upward forecast revisions and stronger investor demand, which can support higher valuations over time.
4) What is Zacks Rank, and why was it included?
The screen required Zacks Rank #1 or #2, aiming to focus on stocks with stronger ranking signals rather than weak or uncertain setups.
5) Why compare performance to the S&P 500?
Because it helps show whether a stock is rising due to its own strength, not just because the whole market is moving up.
6) Can this strategy fail?
Yes. Rising P/E can reverse if earnings disappoint, guidance weakens, or the market shifts away from risk. Thatâs why investors often combine screens with deeper research and risk management.
Where to Learn More (External Resource)
If you want to understand how research firms track strategy performance, you can explore Zacksâ public performance page here:
https://www.zacks.com/performance
Conclusion: Rising P/E Can Be a Feature, Not a Bug
The classic âlow P/Eâ approach will always have a place in investing. But the market also rewards companies that are improving, surprising expectations, and building momentum. A rising P/E can reflect that shift in beliefâespecially when price trends, earnings signals, and liquidity checks line up.
In the December 23, 2025 screen, five namesâAllbirds (BIRD), Ardagh Metal Packaging (AMBP), Atlassian (TEAM), Alarm.com (ALRM), and Workhorse (WKHS)âwere highlighted as examples of stocks showing this rising-P/E pattern, supported by ranking filters and earnings surprise history.
The smart move for readers is to treat screens like this as a starting point. They can help you discover candidates, but the real work is understanding the business, the numbers, and the risks behind the chart.
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