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Here's How Investors Can Find Strong Medical 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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Johnson & Johnson?
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. Johnson & Johnson (JNJ - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.50 a share one day away from its upcoming earnings release on October 18, 2022.
JNJ has an Earnings ESP figure of +0.35%, which, as explained above, is calculated by taking the percentage difference between the $2.50 Most Accurate Estimate and the Zacks Consensus Estimate of $2.49. Johnson & Johnson is one of a large database 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.
JNJ is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Spectrum Pharmaceuticals as well.
Spectrum Pharmaceuticals is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 9, 2022. SPPI's Most Accurate Estimate sits at -$0.14 a share 23 days from its next earnings release.
Spectrum Pharmaceuticals' Earnings ESP figure currently stands at +4.55% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.15.
JNJ and SPPI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 Medical 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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive earnings surprises.
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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% annual returns on average, according to our 10 year backtest.
Stocks with a ranking of #3 (Hold), or 60% of all stocks covered by the Zacks Rank, are expected to perform in-line with the broader market. Stocks with rankings of #2 (Buy) and #1 (Strong Buy), or the top 15% and top 5% of stocks, respectively, should outperform the market; Strong Buy stocks should outperform more than any other rank.
Should You Consider Johnson & Johnson?
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. Johnson & Johnson (JNJ - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $2.50 a share one day away from its upcoming earnings release on October 18, 2022.
JNJ has an Earnings ESP figure of +0.35%, which, as explained above, is calculated by taking the percentage difference between the $2.50 Most Accurate Estimate and the Zacks Consensus Estimate of $2.49. Johnson & Johnson is one of a large database 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.
JNJ is part of a big group of Medical stocks that boast a positive ESP, and investors may want to take a look at Spectrum Pharmaceuticals as well.
Spectrum Pharmaceuticals is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on November 9, 2022. SPPI's Most Accurate Estimate sits at -$0.14 a share 23 days from its next earnings release.
Spectrum Pharmaceuticals' Earnings ESP figure currently stands at +4.55% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of -$0.15.
JNJ and SPPI's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>