We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Stocks to Buy with Impressive Earnings Acceleration
Read MoreHide Full Article
As we look ahead to the Q1 earnings season, investors should ideally consider stocks that are ready to make a big move. Upbeat earnings results are more often than not followed by an uptick in the share price. Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of money a company is making. Notably, earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
Studies, however, have shown that a majority of successful stocks had seen acceleration in earnings before a positive stock price movement. Hence, earnings acceleration works even better in lifting the stock price.
Spot the Outperformers
So, what is earnings acceleration? It helps spot stocks that haven’t caught the attention of investors yet, which once secured will invariably lead to a rally in the share price. This is because earnings acceleration considers both direction and magnitude of growth rates. However, if you pick stocks just on the basis of earnings growth then you are paying for something that has already been reflected in the stock price.
It is the incremental growth in a company’s earnings per share (EPS). In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated frame of time, it can be called earnings acceleration.
Earnings acceleration, hence, should be viewed as a key metric for share price outperformance in Q1 when earnings are expected to be up 6.6% from the same period last year on 6.5% higher revenues. This will follow the 7.4% earnings growth recorded in Q4 on 3.7% revenue improvement, the best performance in almost two years (read more: Looking Ahead to the Q1 Earnings Season).
The Winning Strategy
Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the growth rates of the previous periods. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.
EPS % Projected Growth (Q1)/(Q0) greater than EPS % Growth (Q0)/(Q-1): The projected growth rate for the current quarter (Q1) over the completed quarter (Q0) has to be greater than the growth rate from the completed quarter (Q0) over one quarter ago (Q-1).
EPS % Growth (Q0)/(Q-1) greater than EPS % Growth (Q-1)/(Q-2): The growth rate for the completed quarter (Q0) over one quarter ago (Q-1) has to be greater than the growth rate from one quarter ago (Q-1) over two quarters ago (Q-2).
EPS % Growth (Q-1)/(Q-2) greater than EPS % Growth (Q-2)/(Q-3): The growth rate from one quarter ago (Q-1) over two quarters ago (Q-2) has to be greater than the growth rate from two quarters ago (Q-2) over three quarters ago (Q-3).
In addition to this, we have added the following parameters:
Current Price greater than or equal to $5: This screens out the low-priced stocks.
Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.
U.S. Silica Holdings, Inc. (SLCA - Free Report) produces and sells commercial silica in the U.S. The company operates through two segments, Oil & Gas Proppants and Industrial & Specialty Products. The Zacks Consensus Estimate for the company’s current year earnings climbed more than 100% over the last 60 days, while its expected earnings growth rate for the current quarter is 125.44%.
RPC, Inc. (RES - Free Report) provides a range of oilfield services and equipment for oil and gas companies involved in the exploration, production, and development of oil and gas properties in the U.S., Africa, Canada, Argentina, China, Mexico, Eastern Europe, Latin America, and the Middle East. The Zacks Consensus Estimate for the company’s current year earnings jumped over 100% in the last 60 days, while its expected earnings growth rate for the current quarter is 73.3%.
Intrawest Resorts Holdings, Inc. (SNOW - Free Report) operates as a mountain resort, adventure and real estate company in North America. The company operates through three segments: Mountain, Adventure and Real Estate. The Zacks Consensus Estimate for the company’s current year earnings rose 25.8% over the last 60 days, while it is also expected to give positive returns during the current quarter.
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 »
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
3 Stocks to Buy with Impressive Earnings Acceleration
As we look ahead to the Q1 earnings season, investors should ideally consider stocks that are ready to make a big move. Upbeat earnings results are more often than not followed by an uptick in the share price. Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of money a company is making. Notably, earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
Studies, however, have shown that a majority of successful stocks had seen acceleration in earnings before a positive stock price movement. Hence, earnings acceleration works even better in lifting the stock price.
Spot the Outperformers
So, what is earnings acceleration? It helps spot stocks that haven’t caught the attention of investors yet, which once secured will invariably lead to a rally in the share price. This is because earnings acceleration considers both direction and magnitude of growth rates. However, if you pick stocks just on the basis of earnings growth then you are paying for something that has already been reflected in the stock price.
It is the incremental growth in a company’s earnings per share (EPS). In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated frame of time, it can be called earnings acceleration.
Earnings acceleration, hence, should be viewed as a key metric for share price outperformance in Q1 when earnings are expected to be up 6.6% from the same period last year on 6.5% higher revenues. This will follow the 7.4% earnings growth recorded in Q4 on 3.7% revenue improvement, the best performance in almost two years (read more: Looking Ahead to the Q1 Earnings Season).
The Winning Strategy
Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the growth rates of the previous periods. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.
EPS % Projected Growth (Q1)/(Q0) greater than EPS % Growth (Q0)/(Q-1): The projected growth rate for the current quarter (Q1) over the completed quarter (Q0) has to be greater than the growth rate from the completed quarter (Q0) over one quarter ago (Q-1).
EPS % Growth (Q0)/(Q-1) greater than EPS % Growth (Q-1)/(Q-2): The growth rate for the completed quarter (Q0) over one quarter ago (Q-1) has to be greater than the growth rate from one quarter ago (Q-1) over two quarters ago (Q-2).
EPS % Growth (Q-1)/(Q-2) greater than EPS % Growth (Q-2)/(Q-3): The growth rate from one quarter ago (Q-1) over two quarters ago (Q-2) has to be greater than the growth rate from two quarters ago (Q-2) over three quarters ago (Q-3).
In addition to this, we have added the following parameters:
Current Price greater than or equal to $5: This screens out the low-priced stocks.
Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.
The above criteria narrowed down the universe of around 7,735 stocks to only eight. Here are the top three stocks that flaunt a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. Silica Holdings, Inc. (SLCA - Free Report) produces and sells commercial silica in the U.S. The company operates through two segments, Oil & Gas Proppants and Industrial & Specialty Products. The Zacks Consensus Estimate for the company’s current year earnings climbed more than 100% over the last 60 days, while its expected earnings growth rate for the current quarter is 125.44%.
RPC, Inc. (RES - Free Report) provides a range of oilfield services and equipment for oil and gas companies involved in the exploration, production, and development of oil and gas properties in the U.S., Africa, Canada, Argentina, China, Mexico, Eastern Europe, Latin America, and the Middle East. The Zacks Consensus Estimate for the company’s current year earnings jumped over 100% in the last 60 days, while its expected earnings growth rate for the current quarter is 73.3%.
Intrawest Resorts Holdings, Inc. (SNOW - Free Report) operates as a mountain resort, adventure and real estate company in North America. The company operates through three segments: Mountain, Adventure and Real Estate. The Zacks Consensus Estimate for the company’s current year earnings rose 25.8% over the last 60 days, while it is also expected to give positive returns during the current quarter.
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 »