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4 Stocks to Watch for Explosive Earnings Acceleration
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Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of the money a company is making. Take a company’s revenues over a given period of time, subtract the cost of production and you will have its earnings!
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.
Future Outperformers
Basically, earnings acceleration is the incremental growth in earnings of a company. 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 referred to as earnings acceleration.
In case of earnings growth, you pay for something that is already reflected in the stock price. But, earnings acceleration 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.
Increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period of time. On the other hand, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may at times drag prices down.
Hence, earnings acceleration should be viewed as a key metric for share price outperformance.
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 seven. Here are the top four stocks:
Cubic Corporation designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The company has a Zacks Rank #3 (Hold). The company’s projected growth rate for this year is 96.4%, better than the Oil and Gas - Field Services industry’s estimated gain of 40.2%.
ConocoPhillips (COP - Free Report) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The company has a Zacks Rank #3. The company’s projected growth rate for this year is 119.7%, better than the Oil and Gas - Integrated - United States industry’s forecasted gain of 46.8%.
Continental Resources, Inc. is a crude oil and natural gas company with properties in the North, South and East regions of the United States. The company has a Zacks Rank #3. The company’s projected growth rate for this year is 140%, more than the Oil and Gas - Exploration and Production - United States industry’s projected gain of 28%.
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 »
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4 Stocks to Watch for Explosive Earnings Acceleration
Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of the money a company is making. Take a company’s revenues over a given period of time, subtract the cost of production and you will have its earnings!
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.
Future Outperformers
Basically, earnings acceleration is the incremental growth in earnings of a company. 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 referred to as earnings acceleration.
In case of earnings growth, you pay for something that is already reflected in the stock price. But, earnings acceleration 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.
Increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period of time. On the other hand, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may at times drag prices down.
Hence, earnings acceleration should be viewed as a key metric for share price outperformance.
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 seven. Here are the top four stocks:
Emerge Energy Services LP owns, operates, acquires and develops a portfolio of energy service assets. Emerge Energy Services has a Zacks Rank #2 (Buy). The company’s projected growth rate for this year is 96.4%, higher than the Oil and Gas - Field Services industry’s forecasted gain of 40.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cubic Corporation designs, integrates and operates systems, products and services that provide situational awareness for its customers in the transportation and defense industries. The company has a Zacks Rank #3 (Hold). The company’s projected growth rate for this year is 96.4%, better than the Oil and Gas - Field Services industry’s estimated gain of 40.2%.
ConocoPhillips (COP - Free Report) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and natural gas liquids. The company has a Zacks Rank #3. The company’s projected growth rate for this year is 119.7%, better than the Oil and Gas - Integrated - United States industry’s forecasted gain of 46.8%.
Continental Resources, Inc. is a crude oil and natural gas company with properties in the North, South and East regions of the United States. The company has a Zacks Rank #3. The company’s projected growth rate for this year is 140%, more than the Oil and Gas - Exploration and Production - United States industry’s projected gain of 28%.
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 »