1 Turnaround Stock Wall Street Is Still Underrating

Dear WallStreetZen Member,

This week’s Smart Leverage Alert centers on Stanley Black & Decker (SWK). 

The maker of DeWalt, Craftsman, and the Stanley name is one of the most recognized toolmakers on earth — and after a rough multi-year stretch, its turnaround is now showing up in the numbers. On July 29, the company reported second-quarter adjusted earnings of $1.57 per share, crushing the roughly $1.21 estimate by nearly 30%, and raised its full-year guidance. Management now guides to full-year adjusted EPS of $5.20–$5.80, an 18% jump at the midpoint. 

This is a company executing on its plan. Debt is coming down — roughly $1.7 billion repaid last quarter — margins are expanding as production shifts out of China, and the business still returns cash through a dividend yielding about 3.2%. The stock has responded, climbing back near its highs as the market rewards the progress.

Our Zen Ratings model confirms the strength. SWK earns an A rating, which amounts to a Strong Buy recommendation, landing in the top 3% of more than 4,400 stocks. It's the #3-ranked stock in the A-rated Tool & Accessory industry.

Looking at the Component Grades that shape the overall grade, SWK ranks in the top 18% for Momentum, the top 13% for Value, and the top 13% for Sentiment. That mix points to a well-priced, well-regarded business with real price strength behind it — a turnaround the market is now paying up for, not one it's ignoring.

Our Logic

With Zen Options Essentials, we use "Smart Leverage" — Deep-In-The-Money options that let you control shares for a fraction of the cost, with your maximum risk strictly defined from day one.

The "Smart Leverage" Setup: (Ticker Name) Long Call

Given the strong fundamental case and the fresh earnings confirmation behind Stanley Black & Decker, here's how we're structuring the trade using Smart Leverage — Deep-In-The-Money calls that move nearly dollar-for-dollar with the stock, but with strictly defined risk from day one. 

Instead of committing about $10,240 to own 100 shares outright, a Deep-In-The-Money Call lets you control those same shares for about $2,080.

• The Play: $85 Strike Call (Expiring Jan 15, 2027)
• Delta: 0.8444 — Right in our sweet spot. This option moves nearly dollar-for-dollar with the stock. You get the upside with significantly less capital at risk.
• Intrinsic Value: ~84% — More than four-fifths of what you pay is real value, not time decay. This is what separates a Smart Leverage setup from the kind of speculative options trades that blow up amateur accounts.
• Leverage Multiple: 3.16x — Every dollar moves 3.2x harder than the stock, while the deep ITM strike still keeps meaningful downside protection versus a naked speculative call.
• The Target: For this position to double (+100%), SWK only needs to reach approximately $124.94 — a roughly 22% move in the stock that produces a 100% return on the option premium.

Why Options Over Shares?

A 22% move in SWK stock would be a solid return for shareholders. In this Deep-In-The-Money option, that same move has the potential to double your investment while putting only about $2,080 at risk instead of $10,240.

That's the power of Smart Leverage: stock-like upside with a fraction of the capital and strictly defined risk from day one.

What To Do Next?

SWK is just one of the setups our Zen Options Essentials TradeFinder identified this week.

And the best part? You don't need to spend hours doing research to find these trades. The TradeFinder does the heavy lifting — scanning for Deep-In-The-Money options with the optimal Delta, the right Intrinsic Value, and the right Leverage Multiple — so you can evaluate a trade like this in minutes.

How is that possible?

Because the best options trades aren't about picking exotic strategies or timing the market perfectly. They're about finding great stocks…and using Smart Leverage to control your risk while amplifying your upside.

EXACTLY what the Zen Ratings model is built to find.

EXACTLY what this methodology has been delivering.

If you'd like to see how this entire methodology works, start by watching our presentation, "Options Trading with the Zen Ratings." It walks through the Smart Leverage framework, the TradeFinder, and how we identify these opportunities step by step.

Options Trading with the Zen Ratings >

Or, perhaps you are ready to start using Smart Leverage by becoming a Zen Options Essentials member. Click below to join: 

Zen Options Essentials >

Happy Investing,

Mijusko Sibalic

Senior Writer, Zen Options Essentials

Want to get in touch? Email us at news@wallstreetzen.com.