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 other words, earnings acceleration is the incremental growth in a company’s earnings per share.
Studies have shown that a majority of successful stocks had seen an acceleration in earnings before an uptick in the stock price. In the case of earnings growth, you pay for something 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.
An 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.
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 four. Here’re they –
Eldorado Gold ( EGO Quick Quote EGO - Free Report) is a gold-producing and exploration company. Eldorado Gold mostly has gold assets in Brazil and Turkey.
Eldorado Gold currently has a Zacks Rank #2 (Buy). Its expected earnings growth rate for the next five-year period is 5%.
PattersonUTI Energy ( PTEN Quick Quote PTEN - Free Report) is an oilfield services company. PattersonUTI Energy came into existence following a merger between Patterson Energy, Inc. and UTI Energy Corporation.
PattersonUTI Energy currently has a Zacks Rank #2. Its expected earnings growth rate for the current year is nearly 12%.
UBS Group AG ( UBS Quick Quote UBS - Free Report) provides financial advice and solutions to private, institutional, and corporate clients. It operates through four divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank.
UBS Group AG currently has a Zacks Rank #2. Its expected earnings growth rate for the current year is 8.4%.
Park Hotels & Resorts ( PK Quick Quote PK - Free Report) is a lodging Real Estate company. Park Hotels & Resorts operates luxury hotels and resorts in the United States and international market.
Park Hotels & Resorts currently has a Zacks Rank #1 (Strong Buy). Its expected earnings growth rate for the current year is 64.9%. You can see
the complete list of today’s Zacks #1 Rank stocks here.
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