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3 Stocks to Keep a Tab On for Solid Earnings Acceleration
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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 the 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.
By the way, earnings acceleration 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.
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 21. Here are the three stocks that stand out:
Fortress Transportation and Infrastructure Investors LLC (FTAI - Free Report) is engaged in the owning and acquisition of infrastructure and equipment for leasing. Its segments include Aviation Leasing, Offshore Energy, Shipping Containers, Jefferson Terminal and Railroad.
Laredo Petroleum is engaged in exploring, developing, and acquiring oil and natural gas properties in the Permian and Mid-Continent regions of the United States. Laredo Petroleum is headquartered in Tulsa, Oklahoma.
Laredo Petroleum currently has a Zacks Rank #2 (Buy). Its expected earnings growth rate for the current year is 226.4%.
Groupon (GRPN - Free Report) operates a website that offers daily discount deals. The company acts as a third-party marketing agent through its Local Deals and sells vouchers known as Groupons.
Groupon currently has a Zacks Rank #3. Its expected earnings growth rate for the current year is 156.5%.
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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3 Stocks to Keep a Tab On for Solid Earnings Acceleration
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 the 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.
By the way, earnings acceleration 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.
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 21. Here are the three stocks that stand out:
Fortress Transportation and Infrastructure Investors LLC (FTAI - Free Report) is engaged in the owning and acquisition of infrastructure and equipment for leasing. Its segments include Aviation Leasing, Offshore Energy, Shipping Containers, Jefferson Terminal and Railroad.
Fortress Transportation and Infrastructure Investors currently has a Zacks Rank #3 (Hold). Its expected earnings growth rate for the current year is 10.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Laredo Petroleum is engaged in exploring, developing, and acquiring oil and natural gas properties in the Permian and Mid-Continent regions of the United States. Laredo Petroleum is headquartered in Tulsa, Oklahoma.
Laredo Petroleum currently has a Zacks Rank #2 (Buy). Its expected earnings growth rate for the current year is 226.4%.
Groupon (GRPN - Free Report) operates a website that offers daily discount deals. The company acts as a third-party marketing agent through its Local Deals and sells vouchers known as Groupons.
Groupon currently has a Zacks Rank #3. Its expected earnings growth rate for the current year is 156.5%.
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