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5 Top Stocks to Buy for Superb Earnings Acceleration
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Earnings influence the share price of a company. This is because earnings are a measure of the 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.
Earnings acceleration, however, works even better when it comes to boosting the stock price. Studies have shown that a majority of stocks had seen acceleration in earnings before a rally in stock price.
Future Outperformers
So, what is earnings acceleration? 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.
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. Meanwhile, 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.
Screening Parameters
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 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 16. Here are the top five stocks:
VAREX IMAGING (VREX - Free Report) is an innovator, designer and manufacturer of X-ray imaging components which include tubes, digital flat panel detectors and other image processing solutions. The company currently has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the current year is 812.5%.
Steel Dynamics, Inc. (STLD - Free Report) is among the leading steel producers and metal recyclers in the United States. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 119.7%.
EnPro Industries (NPO - Free Report) is a diversified manufacturer of proprietary engineered products used in critical applications. The company currently has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the current year is 12%. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Dropbox, Inc. (DBX - Free Report) is a service company. It offers a platform which enables users to store and share files, photos, videos, songs and spreadsheets. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 34.4%.
NATIONAL ENERGY (NESR - Free Report) is one of the largest national oilfield services providers in the MENA and Asia Pacific regions. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is nearly 46.2%.
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.
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5 Top Stocks to Buy for Superb Earnings Acceleration
Earnings influence the share price of a company. This is because earnings are a measure of the 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.
Earnings acceleration, however, works even better when it comes to boosting the stock price. Studies have shown that a majority of stocks had seen acceleration in earnings before a rally in stock price.
Future Outperformers
So, what is earnings acceleration? 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.
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. Meanwhile, 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.
Screening Parameters
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 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 16. Here are the top five stocks:
VAREX IMAGING (VREX - Free Report) is an innovator, designer and manufacturer of X-ray imaging components which include tubes, digital flat panel detectors and other image processing solutions. The company currently has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the current year is 812.5%.
Steel Dynamics, Inc. (STLD - Free Report) is among the leading steel producers and metal recyclers in the United States. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 119.7%.
EnPro Industries (NPO - Free Report) is a diversified manufacturer of proprietary engineered products used in critical applications. The company currently has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the current year is 12%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dropbox, Inc. (DBX - Free Report) is a service company. It offers a platform which enables users to store and share files, photos, videos, songs and spreadsheets. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 34.4%.
NATIONAL ENERGY (NESR - Free Report) is one of the largest national oilfield services providers in the MENA and Asia Pacific regions. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is nearly 46.2%.
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