Earnings growth is considered the most important variable in influencing the share price of a company. However, expectations of earnings also play a significant role. In fact, 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.
Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. 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 12. Here are the top five stocks:
Darling Ingredients Inc. ( DAR Quick Quote DAR - Free Report) is a provider of rendering, cooking oil and bakery waste recycling and recovery solutions. The company has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the current year is 55.6%. You can see the complete list of today’s Zacks #1 Rank stocks here. Fox Factory Holding Corp. ( FOXF Quick Quote FOXF - Free Report) is a designer, manufacturer and marketer of suspension products. The company has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the current year is 30.4%. Stanley Black & Decker, Inc. ( SWK Quick Quote SWK - Free Report) manufactures and provides tools and related accessories, healthcare solutions, electronic security solutions, engineered fastening systems, and many more items and services. The company has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 22.5%. Saia, Inc. ( SAIA Quick Quote SAIA - Free Report) is a leading multi-regional less-than-truckload (LTL) carrier. The company has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 34.6%. The SherwinWilliams Company ( SHW Quick Quote SHW - Free Report) is into manufacturing and sales of paints, coatings and related products, primarily in the North and South America. The company has a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 15.1%.
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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