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4 Stocks That Exhibit Solid Earnings Acceleration

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Earnings growth captivates almost everyone, from the top brass to research analysts. Still, earnings acceleration works even better when lifting stock price. Studies have shown that most successful companies have seen an acceleration in earnings before an uptick in their stock price.

Earnings acceleration is the incremental growth in a company’s earnings per share (EPS). 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 called 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 yet caught the attention of investors and, 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 companyy is fundamentally sound and has been on the right track for a considerable period. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may sometimes drag prices down.

Screening Parameters

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 screens 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 four. Here are the stocks:

Catalyst Pharmaceuticals (CPRX - Free Report) is a commercial-stage biopharmaceutical company. Catalyst Pharmaceuticals currently has a Zacks Rank #1 (Strong Buy). CPRX’s expected earnings growth rate for the current year is 106.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ImmunoGen is a biotechnology company. Currently, ImmunoGen has a Zacks Rank #2 (Buy). IMGN’s expected earnings growth rate for the current year is 86.4%.

Inari Medical (NARI - Free Report) is a commercial-stage medical device company, presently sporting a Zacks Rank #1. NARI’s expected earnings growth rate for the current year is 107.3%.

Kyndryl Holdings, Inc. (KD - Free Report) provides applications, data, AI, cloud, core enterprise, digital workplace, security and other related services. Kyndryl Holdings at present has a Zacks Rank #1. KD’s expected earnings growth rate for the current year is 76.3%.

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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.


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