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From CEOs to research analysts, everyone is fascinated with a metric called earnings. But, what exactly do earnings represent and why do they draw so much attention? This is simply because earnings indicate how much money a company makes. Take a company’s revenue over a given period of time, subtract the cost of production and, there it is, you have earnings!
This metric significantly influences a company’s share price. Upbeat earnings results generally lead to an uptick in the share price. However, in addition to actual earnings, expectations of earnings also play a significant role in influencing the share price.
Earnings Estimates and Their Impact on Stock Prices
On numerous occasions we have seen a company’s shares falling in spite of generating earnings growth. This happens because of missing estimates. Here, earnings estimate revisions come into play. These are analysts’ expectation of the future earnings power of the firm that helps in determining the stock price movement. But what exactly do earnings estimates represent?
Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins, expenses and cost control. So, while zeroing down to buy stocks with solid earnings growth, it is also important to figure out whether its earnings estimates are on the rise or not.
We have selected stocks that not only possess historical earnings growth but are also seeing an increase in quarterly and annual earnings estimates.
The Winning Strategy
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we 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 that possess strong EPS growth history.
% Change EPS F(0)/F(-1) greater than or equal to 5: Companies that witnessed year-over-year earnings growth rate of 5% or more in the last reported fiscal year.
% 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 over 7,747 stocks to only 7. Here are the top 5 stocks:
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
See More Zacks Research for These Tickers
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Buy These 5 Stocks with Explosive Earnings Growth
From CEOs to research analysts, everyone is fascinated with a metric called earnings. But, what exactly do earnings represent and why do they draw so much attention? This is simply because earnings indicate how much money a company makes. Take a company’s revenue over a given period of time, subtract the cost of production and, there it is, you have earnings!
This metric significantly influences a company’s share price. Upbeat earnings results generally lead to an uptick in the share price. However, in addition to actual earnings, expectations of earnings also play a significant role in influencing the share price.
Earnings Estimates and Their Impact on Stock Prices
On numerous occasions we have seen a company’s shares falling in spite of generating earnings growth. This happens because of missing estimates. Here, earnings estimate revisions come into play. These are analysts’ expectation of the future earnings power of the firm that helps in determining the stock price movement. But what exactly do earnings estimates represent?
Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins, expenses and cost control. So, while zeroing down to buy stocks with solid earnings growth, it is also important to figure out whether its earnings estimates are on the rise or not.
We have selected stocks that not only possess historical earnings growth but are also seeing an increase in quarterly and annual earnings estimates.
The Winning Strategy
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we 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 that possess strong EPS growth history.
% Change EPS F(0)/F(-1) greater than or equal to 5: Companies that witnessed year-over-year earnings growth rate of 5% or more in the last reported fiscal year.
% 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 over 7,747 stocks to only 7. Here are the top 5 stocks:
Dycom Industries Inc. (DY - Free Report)
Casey's General Stores, Inc. (CASY - Free Report)
Copart, Inc. (CPRT - Free Report)
Boston Scientific Corporation (BSX - Free Report)
Euronet Worldwide, Inc. (EEFT - Free Report)
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.
Click here to sign up for a free trial to the Research Wizard today.
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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »