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3 Stocks Worth a Buy for Solid Earnings Acceleration
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From the top brass to research analysts, earnings growth interests all. This is because earnings are a measure of the money a company is making. Earnings are essentially revenues that a company generates after deducting the cost of production over a period of time.
Earnings acceleration, however, works even better when it comes to boosting the stock price. Studies have shown that the majority of stocks have seen an acceleration in earnings before a rally in stock price. Basically, earnings acceleration is the incremental growth in the earnings of a company. In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated frame of time, it can be referred to as earnings acceleration.
In the case of earnings growth, you pay for something that is already reflected in the stock price. But earnings acceleration helps spot stocks that haven’t caught the attention of investors yet, which once secured will invariably lead to a rally in the share price. This is because earnings acceleration considers both the direction and magnitude of growth rates.
An increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period of time. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may at times drag prices down.
This is the reason why earnings acceleration should be viewed as a key metric for share price outperformance and a preferred criterion for investors to select stocks this year.
Screening Parameters
Let us look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the previous periods’ growth rates. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.
EPS % Projected Growth (Q1)/(Q0) greater than EPS % Growth (Q0)/(Q-1): The projected growth rate for the current quarter (Q1) over the completed quarter (Q0) has to be greater than the growth rate from the completed quarter (Q0) over one quarter ago (Q-1).
EPS % Growth (Q0)/(Q-1) greater than EPS % Growth (Q-1)/(Q-2): The growth rate for the completed quarter (Q0) over one quarter ago (Q-1) has to be greater than the growth rate from one quarter ago (Q-1) over two quarters ago (Q-2).
EPS % Growth (Q-1)/(Q-2) greater than EPS % Growth (Q-2)/(Q-3): The growth rate from one quarter ago (Q-1) over two quarters ago (Q-2) has to be greater than the growth rate from two quarters ago (Q-2) over three quarters ago (Q-3).
In addition to this, we have added the following parameters:
Current Price greater than or equal to $5: This screen out low-priced stocks.
Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.
The above criteria narrowed down the universe of around 7,735 stocks to only three. Here are the stocks:
Becton, Dickinson and Company (BDX - Free Report) is a medical technology company engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents. The company currently has a Zacks Rank #2 (Buy). BDX’s expected earnings growth rate for the current year is 7.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raytheon Technologies (RTX - Free Report) has emerged as an aerospace and defense company. The company currently has a Zacks Rank #2. RTX’s expected earnings growth rate for the current year is 5.2%.
Palantir Technologies (PLTR - Free Report) builds and deploys software platforms for the intelligence community, principally in the United States. The company currently has a Zacks Rank #2. PLTR’s expected earnings growth rate for the current year is 233.3%.
You can sign up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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3 Stocks Worth a Buy for Solid Earnings Acceleration
From the top brass to research analysts, earnings growth interests all. This is because earnings are a measure of the money a company is making. Earnings are essentially revenues that a company generates after deducting the cost of production over a period of time.
Earnings acceleration, however, works even better when it comes to boosting the stock price. Studies have shown that the majority of stocks have seen an acceleration in earnings before a rally in stock price. Basically, earnings acceleration is the incremental growth in the earnings of a company. In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated frame of time, it can be referred to as earnings acceleration.
In the case of earnings growth, you pay for something that is already reflected in the stock price. But earnings acceleration helps spot stocks that haven’t caught the attention of investors yet, which once secured will invariably lead to a rally in the share price. This is because earnings acceleration considers both the direction and magnitude of growth rates.
An increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period of time. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may at times drag prices down.
This is the reason why earnings acceleration should be viewed as a key metric for share price outperformance and a preferred criterion for investors to select stocks this year.
Screening Parameters
Let us look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the previous periods’ growth rates. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.
EPS % Projected Growth (Q1)/(Q0) greater than EPS % Growth (Q0)/(Q-1): The projected growth rate for the current quarter (Q1) over the completed quarter (Q0) has to be greater than the growth rate from the completed quarter (Q0) over one quarter ago (Q-1).
EPS % Growth (Q0)/(Q-1) greater than EPS % Growth (Q-1)/(Q-2): The growth rate for the completed quarter (Q0) over one quarter ago (Q-1) has to be greater than the growth rate from one quarter ago (Q-1) over two quarters ago (Q-2).
EPS % Growth (Q-1)/(Q-2) greater than EPS % Growth (Q-2)/(Q-3): The growth rate from one quarter ago (Q-1) over two quarters ago (Q-2) has to be greater than the growth rate from two quarters ago (Q-2) over three quarters ago (Q-3).
In addition to this, we have added the following parameters:
Current Price greater than or equal to $5: This screen out low-priced stocks.
Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.
The above criteria narrowed down the universe of around 7,735 stocks to only three. Here are the stocks:
Becton, Dickinson and Company (BDX - Free Report) is a medical technology company engaged principally in the development, manufacture and sale of medical devices, instrument systems and reagents. The company currently has a Zacks Rank #2 (Buy). BDX’s expected earnings growth rate for the current year is 7.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raytheon Technologies (RTX - Free Report) has emerged as an aerospace and defense company. The company currently has a Zacks Rank #2. RTX’s expected earnings growth rate for the current year is 5.2%.
Palantir Technologies (PLTR - Free Report) builds and deploys software platforms for the intelligence community, principally in the United States. The company currently has a Zacks Rank #2. PLTR’s expected earnings growth rate for the current year is 233.3%.
You can sign up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance