Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Alibaba?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Alibaba (BABA - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.52 a share, just three days from its upcoming earnings release on February 23, 2023.
By taking the percentage difference between the $2.52 Most Accurate Estimate and the $2.29 Zacks Consensus Estimate, Alibaba has an Earnings ESP of +10.16%. Investors should also know that BABA is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
BABA is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at eBay (EBAY - Free Report) as well.
Slated to report earnings on February 22, 2023, eBay holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.07 a share two days from its next quarterly update.
For eBay, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.05 is +1.52%.
Because both stocks hold a positive Earnings ESP, BABA and EBAY could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Alibaba?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Alibaba (BABA - Free Report) earns a #2 (Buy) right now and its Most Accurate Estimate sits at $2.52 a share, just three days from its upcoming earnings release on February 23, 2023.
By taking the percentage difference between the $2.52 Most Accurate Estimate and the $2.29 Zacks Consensus Estimate, Alibaba has an Earnings ESP of +10.16%. Investors should also know that BABA is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
BABA is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at eBay (EBAY - Free Report) as well.
Slated to report earnings on February 22, 2023, eBay holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.07 a share two days from its next quarterly update.
For eBay, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $1.05 is +1.52%.
Because both stocks hold a positive Earnings ESP, BABA and EBAY could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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