Stock picks of the week: 5 stocks with consistent score improvement and upside potential of up to 29% in 1 year

Introduction

In volatile markets, one of the clearest ways to identify promising opportunities is to look at stocks that are improving across multiple dimensions — earnings, fundamentals, valuation, risk profile, and momentum. A recent report (“Stock picks of the week: 5 stocks with consistent score improvement and upside potential of up to 29%”) by The Economic Times applies exactly that framework. This essay reviews those picks, examines what makes them stand out, considers the upside forecast, and discusses potential caveats for investors.

What “Score Improvement” Means

Before diving into the specific stocks, it helps to understand what’s meant by “score improvement.” According to the source:

• The stocks selected have shown rising scores over recent periods in five pillars: earnings, fundamentals, relative valuation (how the stock’s valuation looks compared to peers and its own history), risk, and price momentum.
• This means investors are not just looking at one metric (say, earnings), but a composite view. A stock with improving momentum but deteriorating fundamentals or stretched valuation may be less attractive. The ones picked have generally improved broadly.
• The upside potential of up to 29% indicates that analysts believe that, barring adverse surprise, the stock prices may rise by that much over a time horizon (roughly 1 year) given the current improvement in outlook.

The Picks & Why They Are Promising

While the full list of the five stocks is behind a paywall in the original ET article, one of the clearer examples that emerges in related analyst reports is Piramal Pharma, which is highlighted in “Five analyst picks with high upsides.” According to that report:

• Piramal Pharma has been initiated with a “Buy” call by Edelweiss, with a target price of ₹130, implying an upside of ≈ 29.9%.
• Key reasons for positivity include: a fairly strong product pipeline, increasing order inflows, and recovery in manufacturing base after disruptions (including high attrition during the pandemic). Analysts believe that recent challenges have been easing.

Given that this aligns well with the criteria of consistent improvement (especially in earnings pipelines, order inflows, fundamentals), Piramal Pharma is a strong exemplar of the methodology used in the “score improvement + upside” picks.

The other four stocks (from ET’s 5-stock list) are not fully disclosed in the summary available in the public domain, but we can infer that they would have similar attributes: improving earnings or pipelines, valuations not yet fully rich, decent momentum, and manageable risk.

Upside Potential & What Drives It

What’s driving the expectation of up-to-29% upside in these stock picks?

1. Earnings recovery / improvement: Many of the stocks are showing signs of stabilizing or improving earnings after weak or volatile periods. As profits recover, investor confidence improves, leading to multiple expansion or price re-rating.
2. Valuation gaps: Some stocks may have been under-priced relative to peers or their own historical averages, especially after recent corrections, or because of temporary headwinds. If fundamentals catch up, valuation improvement can offer part of the return.
3. Positive momentum: Price momentum (recent stock price trends, breakouts, etc.) tends to attract further buying. Stocks which are already showing upward movement tend to have better chances of continuing, especially if supported by volume, favourable news or improved outlook.
4. Sectoral tailwinds: Sometimes the broader industry or sector dynamics assist — for example, policy support, better demand, easing supply chain constraints, or macroeconomic reforms that favor certain sectors. These improve both visibility and investor sentiment.

Risks and What Could Go Wrong

Even though the stocks have been picked with improved scores and appear promising, there are several risks and caveats investors should consider:

• Overvaluation risk: Even with improving fundamentals, if the stock has already priced in much of the good news, the remaining upside may be limited or fragile.
• Momentum reversal: Stocks riding on momentum can be vulnerable to sharp reversals if macro news turns negative, interest rates move unfavorably, or global risk sentiment deteriorates.
• Execution risk: For companies like Piramal Pharma, order inflows, pipeline launches, product approvals, or manufacturing ramp-up are uncertain. Delays or regulatory issues can dampen expectations.
• Sector or policy risk: If regulatory environment shifts, or if sector‐specific headwinds (e.g. raw material inflation, supply chain constraints, competition) hit, performance may lag expectations.
• Macroeconomic / global factors: Fluctuating interest rates, foreign investor flows, currency movements or geopolitical instability can impact investor sentiment and valuations adversely.

What Investors Should Do

Given the upside potential and the risks, prudent investors might consider the following approach:

• Diversification: Don’t put all capital into one or two of these picks; spread across multiple promising stocks and sectors to mitigate stock-specific risks.
• Stage-wise buying: Rather than all-in at once, consider buying in tranches as the stock confirms strength (breakout, volume, favorable earnings reports).
• Monitoring performance metrics: Keep track of the same five pillars — earnings, fundamentals, valuation, risk, momentum. If any of these start to deteriorate, re-evaluate the position.
• Watch for catalysts: Events such as results, policy announcements, sector news (e.g. raw material price drops, export demand, regulatory approvals) can act as accelerants. These picks make more sense when catalysts are visible or likely.
• Have stop-loss / risk control in place: Since upside is never guaranteed, protecting downside is important. Technical or fundamental stop-loss levels or exit criteria should be defined.

Conclusion

The strategy of identifying stocks with consistent improvement across multiple dimensions and pairing that with reasonable upside potentials (up to ~29%) is a sensible way to pick likely winners in an uncertain market. Among the specific names, Piramal Pharma stands out as a good example of this model, with its anticipated recovery, strong products pipeline, and valuation still allowing for growth.

However, while the potential is real, the risks are also non-trivial. Macroeconomic volatility, policy or regulatory surprises, valuation mismatches, or momentum reversals can cut into returns. For investors who are selective, disciplined, and patient, these picks offer attractive opportunities. For those less comfortable with volatility, a more conservative subset or partial exposure may be better.