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4 Top Stocks that Boast Solid Earnings Acceleration
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Upbeat earnings results are more often than not followed by an uptick in the share price. Notably, earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
But earnings acceleration works even better in boosting the stock price. Studies have shown that majority of successful stocks had seen acceleration in earnings before a positive stock price movement.
Spot the 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.
This is the reason why 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.
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.)
The above criteria narrowed down the universe of around 7,889 stocks to only ten. Here are the top four stocks.
Verisign, Inc. (VRSN - Free Report) is a provider of domain name registry services and Internet security. The company is likely to yield a return of 11.1% this year, better than the industry’s projected gain of 10.4%.
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 is likely to yield a return of 158.3% this year, better than the industry’s estimated gain of 10%.
Patterson-UTI Energy, Inc. (PTEN - Free Report) is an oilfield services company. The company owns and operates a fleet of land-based drilling rigs and a fleet of pressure pumping equipment in the U.S. The company is likely to yield a return of 54.9% this year, better than the industry’s projected gain of 6.9%.
Independent Bank Corp (INDB - Free Report) is a bank holding company. The company operates through its subsidiary, Rockland Trust Company. The company is likely to yield a return of 10.7% this year, better than the industry’s estimated gain of 9.1%.
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 Top Stocks that Boast Solid Earnings Acceleration
Upbeat earnings results are more often than not followed by an uptick in the share price. Notably, earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
But earnings acceleration works even better in boosting the stock price. Studies have shown that majority of successful stocks had seen acceleration in earnings before a positive stock price movement.
Spot the 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.
This is the reason why 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.
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.)
The above criteria narrowed down the universe of around 7,889 stocks to only ten. Here are the top four stocks.
Verisign, Inc. (VRSN - Free Report) is a provider of domain name registry services and Internet security. The company is likely to yield a return of 11.1% this year, better than the industry’s projected gain of 10.4%.
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 is likely to yield a return of 158.3% this year, better than the industry’s estimated gain of 10%.
Patterson-UTI Energy, Inc. (PTEN - Free Report) is an oilfield services company. The company owns and operates a fleet of land-based drilling rigs and a fleet of pressure pumping equipment in the U.S. The company is likely to yield a return of 54.9% this year, better than the industry’s projected gain of 6.9%.
Independent Bank Corp (INDB - Free Report) is a bank holding company. The company operates through its subsidiary, Rockland Trust Company. The company is likely to yield a return of 10.7% this year, better than the industry’s estimated gain of 9.1%.
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 »