If a company doesn’t make money, it certainly won’t last over the long haul. Therefore, earnings growth is the highest priority for the top brass of any organization.
Consider a company’s revenues over a given period of time, subtract the cost of production, and you have earnings. This metric is also considered the most important variable in influencing the share price. But, expectations of earnings also play a significant role.
Earnings Estimates & Share Price Movements
We have, often, seen a decline in the stock price despite earnings growth and a rally in the price following an earnings decline. This is largely a result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, it is important for investors to buy stocks that have historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
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.)
5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history).
% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).
% 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 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week).
% 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 around 7,839 stocks to only eight. Here are the top four stocks:
Americas CarMart, Inc.
CRMT Quick Quote CRMT - Free Report
) operates automotive dealerships and is one of the largest automotive retailers in the United States. The company, currently, sports a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the current and next year is 34.4% and 9.4%, respectively. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Best Buy Co., Inc.
BBY Quick Quote BBY - Free Report
) is a multinational specialty retailer of consumer electronics, home office products and entertainment software, to name a few. The company, currently, carries a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the current and next year is nearly 18% and 2.5%, respectively.
IDEXX Laboratories, Inc.
IDXX Quick Quote IDXX - Free Report
) is a developer, manufacturer and distributer of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. The company, currently, has a Zacks Rank #2. The company’s expected earnings growth rate for the current and next year is 25.4% and 11.4%, respectively.
PKI Quick Quote PKI - Free Report
) provides scientific instruments, consumables, and services to pharmaceutical, biomedical, environmental testing, chemical, and general industrial markets worldwide. The company, currently, flaunts a Zacks Rank #1. The company’s expected earnings growth rate for the current and next year is 73.7% and almost 9%, respectively.
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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.