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What are earnings? In simple terms, it is how much money a company generates. In other words, when you subtract the cost of production from revenues, you get earnings. But why is everyone, right from the top brass to research analysts, captivated by this metric? This is because earnings are the ultimate indicator of profitability and also have a direct impact on the share price.
An upbeat earnings result more or less leads to an uptick in the share price. Earnings expectations too play a crucial role in share price movements.
Impact of Earnings Estimates on Share Prices
Despite generating earnings growth, companies have on several occasions seen their share prices falling. This happens when a company’s earnings fail to meet market expectations. So, what are earnings estimates? These are analysts’ expectations of a company’s future quarterly or annual earnings. Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins, expenses and cost control.
Earnings estimates also help an analyst to use cash flow analysis to determine the fair value of a firm. So, it is imperative for an investor zeroing down to buy stocks with solid earnings growth to also make sure that their earnings estimates are on the rise.
We have selected stocks that have displayed historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
Screening Parameters
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we added the following parameters:
Zacks Rank equal to 1 (Only Zacks' '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 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 7,752 stocks to only 7. Here are the top 5 stocks:
The J. M. Smucker Company (SJM - Free Report) manufactures and sells branded food products all over the world. SJM operates through four segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International, Foodservice and Natural Foods. The company’s estimated earnings growth rate for this year is 17.1%.
Dycom Industries Inc. (DY - Free Report) provides specialty contracting services in the U.S. DY provides a range of specialty contracting services including engineering, construction, maintenance and installation services. The company’s estimated earnings growth rate for this year is 82.8%.
Sanmina Corporation (SANM - Free Report) provides integrated manufacturing solutions, components, products and repair logistics and after-market services across the globe. The company’s estimated earnings growth rate for this year is 13.6%.
Copart, Inc. (CPRT - Free Report) offers a full range of services to process and sell salvage vehicles through auctions, mostly to licensed dismantlers, rebuilders and used vehicle dealers. The company’s estimated earnings growth rate for this year is 23.9%.
HNI Corp. (HNI - Free Report) along with its subsidiaries engages in the design, manufacture and marketing of office furniture and hearth products primarily in the U.S. The company’s estimated earnings growth rate for this year is 9.3%.
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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Bet on These 5 Stocks with Solid Earnings Growth
What are earnings? In simple terms, it is how much money a company generates. In other words, when you subtract the cost of production from revenues, you get earnings. But why is everyone, right from the top brass to research analysts, captivated by this metric? This is because earnings are the ultimate indicator of profitability and also have a direct impact on the share price.
An upbeat earnings result more or less leads to an uptick in the share price. Earnings expectations too play a crucial role in share price movements.
Impact of Earnings Estimates on Share Prices
Despite generating earnings growth, companies have on several occasions seen their share prices falling. This happens when a company’s earnings fail to meet market expectations. So, what are earnings estimates? These are analysts’ expectations of a company’s future quarterly or annual earnings. Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins, expenses and cost control.
Earnings estimates also help an analyst to use cash flow analysis to determine the fair value of a firm. So, it is imperative for an investor zeroing down to buy stocks with solid earnings growth to also make sure that their earnings estimates are on the rise.
We have selected stocks that have displayed historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
Screening Parameters
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we added the following parameters:
Zacks Rank equal to 1 (Only Zacks' '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 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 7,752 stocks to only 7. Here are the top 5 stocks:
The J. M. Smucker Company (SJM - Free Report) manufactures and sells branded food products all over the world. SJM operates through four segments: U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International, Foodservice and Natural Foods. The company’s estimated earnings growth rate for this year is 17.1%.
Dycom Industries Inc. (DY - Free Report) provides specialty contracting services in the U.S. DY provides a range of specialty contracting services including engineering, construction, maintenance and installation services. The company’s estimated earnings growth rate for this year is 82.8%.
Sanmina Corporation (SANM - Free Report) provides integrated manufacturing solutions, components, products and repair logistics and after-market services across the globe. The company’s estimated earnings growth rate for this year is 13.6%.
Copart, Inc. (CPRT - Free Report) offers a full range of services to process and sell salvage vehicles through auctions, mostly to licensed dismantlers, rebuilders and used vehicle dealers. The company’s estimated earnings growth rate for this year is 23.9%.
HNI Corp. (HNI - Free Report) along with its subsidiaries engages in the design, manufacture and marketing of office furniture and hearth products primarily in the U.S. The company’s estimated earnings growth rate for this year is 9.3%.
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 »