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How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Paypal?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Paypal (PYPL - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.21 a share two days away from its upcoming earnings release on February 9, 2023.
By taking the percentage difference between the $1.21 Most Accurate Estimate and the $1.20 Zacks Consensus Estimate, Paypal has an Earnings ESP of +0.84%. Investors should also know that PYPL is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PYPL is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Alpha and Omega Semiconductor (AOSL - Free Report) as well.
Alpha and Omega Semiconductor, which is readying to report earnings on May 4, 2023, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $1.11 a share, and AOSL is 86 days out from its next earnings report.
The Zacks Consensus Estimate for Alpha and Omega Semiconductor is $0.84, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +32.14%.
Because both stocks hold a positive Earnings ESP, PYPL and AOSL could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
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How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Paypal?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. Paypal (PYPL - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.21 a share two days away from its upcoming earnings release on February 9, 2023.
By taking the percentage difference between the $1.21 Most Accurate Estimate and the $1.20 Zacks Consensus Estimate, Paypal has an Earnings ESP of +0.84%. Investors should also know that PYPL is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PYPL is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Alpha and Omega Semiconductor (AOSL - Free Report) as well.
Alpha and Omega Semiconductor, which is readying to report earnings on May 4, 2023, sits at a Zacks Rank #1 (Strong Buy) right now. It's Most Accurate Estimate is currently $1.11 a share, and AOSL is 86 days out from its next earnings report.
The Zacks Consensus Estimate for Alpha and Omega Semiconductor is $0.84, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +32.14%.
Because both stocks hold a positive Earnings ESP, PYPL and AOSL could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>