One of the most important variables that influences share prices is earnings growth. This is because if the company doesn’t make money, it won’t stand the test of time. Consider a company’s revenues over a given period of time, subtract the cost of production, and you have earnings. But it’s also true that expectations of earnings play a significant role in impacting share prices.
Often, we have 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 39. Here are the top four stocks:
Jack In The Box Inc. ( JACK Quick Quote JACK - Free Report) is a restaurant company that operates and franchises through Jack in the Box quick-service restaurants, and is one of the nation’s largest hamburger chains. The company has a Zacks Rank #2 (Buy). Its expected earnings growth rate for the current year is 54.8%. TechTarget, Inc. ( TTGT Quick Quote TTGT - Free Report) is a leading online Information Technology media company. The company has a Zacks Rank #1 (Strong Buy). Its expected earnings growth rate for the current year is 62.6%. You can see the complete list of today’s Zacks #1 Rank stocks here. PDC Energy, Inc. ( PDCE Quick Quote PDCE - Free Report) is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company has a Zacks Rank #1. Its expected earnings growth rate for the current year is 198%. Qorvo, Inc. ( QRVO Quick Quote QRVO - Free Report) is a leading provider of core technologies and radio frequency (RF) solutions for mobile, infrastructure and aerospace/defense applications. The company has a Zacks Rank #2. Its expected earnings growth rate for the current year is 17.5%.
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