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Why Investors Need to Take Advantage of These 2 Business Services Stocks Now

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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.

We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.

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 Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.

With this in mind, the Expected Surprise Prediction compares the Most Accurate Estimate (being the most recent) against the overall Zacks Consensus Estimate. The percentage difference provides the ESP figure. The system also utilizes our core Zacks Rank to provide a stronger system for identifying stocks that might beat their next quarterly earnings estimate and possibly see the stock price climb.

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 #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 Paychex?

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. Paychex (PAYX - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1.27 a share 12 days away from its upcoming earnings release on March 29, 2023.

By taking the percentage difference between the $1.27 Most Accurate Estimate and the $1.24 Zacks Consensus Estimate, Paychex has an Earnings ESP of +2.25%. Investors should also know that PAYX 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.

PAYX is just one of a large group of Business Services stocks with a positive ESP figure. Global Payments (GPN - Free Report) is another qualifying stock you may want to consider.

Global Payments is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on May 1, 2023. GPN's Most Accurate Estimate sits at $2.32 a share 45 days from its next earnings release.

For Global Payments, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.28 is +1.84%.

PAYX and GPN'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:


Paychex, Inc. (PAYX) - free report >>

Global Payments Inc. (GPN) - free report >>

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