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Here's How Investors Can Find Strong Retail and Wholesale Stocks with the Zacks ESP Screener
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Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider AutoZone?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. AutoZone (AZO - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $39.35 a share 28 days away from its upcoming earnings release on September 20, 2022.
By taking the percentage difference between the $39.35 Most Accurate Estimate and the $38.38 Zacks Consensus Estimate, AutoZone has an Earnings ESP of +2.53%. Investors should also know that AZO is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
AZO is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Domino's Pizza (DPZ - Free Report) as well.
Slated to report earnings on October 13, 2022, Domino's Pizza holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.08 a share 51 days from its next quarterly update.
For Domino's Pizza, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3 is +2.79%.
Because both stocks hold a positive Earnings ESP, AZO and DPZ could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>
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Here's How Investors Can Find Strong Retail and Wholesale Stocks with the Zacks ESP Screener
Two factors often determine stock prices in the long run: earnings and interest rates. Investors can't control the latter, but they can focus on a company's earnings results every quarter.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Expected Surprise Prediction, or ESP, works by locking in on the most up-to-date analyst earnings revisions because they can be more accurate than estimates from weeks or even months before the actual release date. The thinking is pretty straightforward: analysts who provide earnings estimates closer to the report are likely to have more information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% annual returns on average, according to our 10 year backtest.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider AutoZone?
The last thing we will do today, now that we have a grasp on the ESP and how powerful of a tool it can be, is to quickly look at a qualifying stock. AutoZone (AZO - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $39.35 a share 28 days away from its upcoming earnings release on September 20, 2022.
By taking the percentage difference between the $39.35 Most Accurate Estimate and the $38.38 Zacks Consensus Estimate, AutoZone has an Earnings ESP of +2.53%. Investors should also know that AZO is one of a large group of stocks with positive ESPs. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
AZO is part of a big group of Retail and Wholesale stocks that boast a positive ESP, and investors may want to take a look at Domino's Pizza (DPZ - Free Report) as well.
Slated to report earnings on October 13, 2022, Domino's Pizza holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $3.08 a share 51 days from its next quarterly update.
For Domino's Pizza, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $3 is +2.79%.
Because both stocks hold a positive Earnings ESP, AZO and DPZ could potentially post earnings beats in their next reports.
Find Stocks to Buy or Sell Before They're Reported
Use the Zacks Earnings ESP Filter to turn up stocks with the highest probability of positively, or negatively, surprising to buy or sell before they're reported for profitable earnings season trading. Check it out here >>