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Here's How Investors Can Find Strong Finance Stocks with the Zacks ESP Screener
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Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 SL Green?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. SL Green (SLG - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.66 a share, just 30 days from its upcoming earnings release on October 19, 2022.
SL Green's Earnings ESP sits at +0.57%, which, as explained above, is calculated by taking the percentage difference between the $1.66 Most Accurate Estimate and the Zacks Consensus Estimate of $1.65. SLG is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
SLG is just one of a large group of Finance stocks with a positive ESP figure. Franklin Resources (BEN - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on November 7, 2022, Franklin Resources holds a #1 (Strong Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.85 a share 49 days from its next quarterly update.
Franklin Resources' Earnings ESP figure currently stands at +10.97% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.77.
SLG and BEN's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 Finance Stocks with the Zacks ESP Screener
Wall Street watches a company's quarterly report closely to understand as much as possible about its recent performance and what to expect going forward. Of course, one figure often stands out among the rest: earnings.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
Now that we understand the basic idea, let's look at how the Expected Surprise Prediction works. The ESP is calculated by comparing the Most Accurate Estimate to the Zacks Consensus Estimate, with the percentage difference between the two giving us the Zacks ESP figure.
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 SL Green?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. SL Green (SLG - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.66 a share, just 30 days from its upcoming earnings release on October 19, 2022.
SL Green's Earnings ESP sits at +0.57%, which, as explained above, is calculated by taking the percentage difference between the $1.66 Most Accurate Estimate and the Zacks Consensus Estimate of $1.65. SLG is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
SLG is just one of a large group of Finance stocks with a positive ESP figure. Franklin Resources (BEN - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on November 7, 2022, Franklin Resources holds a #1 (Strong Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $0.85 a share 49 days from its next quarterly update.
Franklin Resources' Earnings ESP figure currently stands at +10.97% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.77.
SLG and BEN's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>