Back to top

Image: Bigstock

Here's How Investors Can Find Strong Computer and Technology Stocks with the Zacks ESP Screener

Read MoreHide Full Article

Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.

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.

Hunting for 'earnings whispers' or companies poised to beat their quarterly earnings estimates is a somewhat common practice. But that doesn't make it easy. One way that has been proven to work is by using the Zacks Earnings ESP tool.

The Zacks Earnings ESP, Explained

The Zacks Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete 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.

Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 28.3% annual returns on average, according to our 10 year backtest.

Stocks with a #3 (Hold) ranking, which is most stocks covered at 60%, are expected to perform in-line with the broader market. But stocks that fall into the #2 (Buy) and #1 (Strong Buy) ranking, 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 Coupa Software?

The final step today is to look at a stock that meets our ESP qualifications. Coupa Software earns a #2 (Buy) 14 days from its next quarterly earnings release on December 12, 2022, and its Most Accurate Estimate comes in at $0.19 a share.

Coupa Software's Earnings ESP sits at +71.17%, which, as explained above, is calculated by taking the percentage difference between the $0.19 Most Accurate Estimate and the Zacks Consensus Estimate of $0.11. COUP 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.

COUP is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Adobe Systems (ADBE - Free Report) as well.

Adobe Systems is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on December 15, 2022. ADBE's Most Accurate Estimate sits at $3.50 a share 17 days from its next earnings release.

The Zacks Consensus Estimate for Adobe Systems is $3.50, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +0.03%.

COUP and ADBE'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 >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Adobe Inc. (ADBE) - free report >>

Published in