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4 Stocks to Buy for Remarkable Earnings Growth

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Consider a company’s revenues over a given period of time, subtract the cost of production, and you have earnings.
 
This metric is also considered the most important variable in influencing the share price. But, expectations of earnings also play a significant role.

Earnings Estimates Determine Share Prices

We have often seen a decline in the stock price despite earnings growth and a rally in the price following an earnings decline. This is largely a result of a company’s earnings failing to meet market expectations.
 
Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
 
Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, it is important for investors to buy stocks that have historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.

Screening Criteria:

In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
 
Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)
 
5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history).
 
% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).
 
% Change Q1 Estimates over the last 4 weeks greater than zero (stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks).
 
% Change F1 Estimates over the last 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week).
 
% Change F1 Estimates over the last 4 weeks greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).
 
The above criteria narrowed down the universe of around 7,839 stocks to only seven. Here are the top four stocks:
 
WESCO International, Inc. (WCC - Free Report) is one of the largest players in the highly fragmented distribution market for electrical construction products in North America. The company has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the next year is 15.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
lululemon athletica inc. (LULU - Free Report) is a yoga-inspired athletic apparel company that creates lifestyle components. The company has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the next year is 50.2%.
 
Ollies Bargain Outlet Holdings, Inc. (OLLI - Free Report) is a value retailer of brand name merchandise at drastically reduced prices. The company has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 49%.
 
RH (RH - Free Report) is a leading luxury retailer in the home furnishing space. The company has a Zacks Rank #2. The company’s expected earnings growth rate for the next year is 19%.
 
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
 
The Research Wizard is a great place to begin. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
 
 
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
 
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance

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