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These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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 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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Fastly?
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. Fastly (FSLY - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.05 a share 21 days away from its upcoming earnings release on May 1, 2024.
By taking the percentage difference between the -$0.05 Most Accurate Estimate and the -$0.07 Zacks Consensus Estimate, Fastly has an Earnings ESP of +23.91%. Investors should also know that FSLY 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.
FSLY is just one of a large group of Computer and Technology stocks with a positive ESP figure. Woodward (WWD - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on May 6, 2024, Woodward holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.41 a share 26 days from its next quarterly update.
The Zacks Consensus Estimate for Woodward is $1.31, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.91%.
Because both stocks hold a positive Earnings ESP, FSLY and WWD could potentially post earnings beats in their next reports.
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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These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
The earnings figure itself is key, of course, but a beat or miss on the bottom line can sometimes be just as, if not more, important. Therefore, investors should consider paying close attention to these earnings surprises, as a big beat can help a stock climb and vice versa.
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 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.
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.
When we join a positive earnings ESP with a Zacks Rank #3 (Hold) or stronger, stocks posted a positive bottom-line surprise 70% of the time. Plus, this system saw investors produce roughly 28% 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 Fastly?
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. Fastly (FSLY - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.05 a share 21 days away from its upcoming earnings release on May 1, 2024.
By taking the percentage difference between the -$0.05 Most Accurate Estimate and the -$0.07 Zacks Consensus Estimate, Fastly has an Earnings ESP of +23.91%. Investors should also know that FSLY 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.
FSLY is just one of a large group of Computer and Technology stocks with a positive ESP figure. Woodward (WWD - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on May 6, 2024, Woodward holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $1.41 a share 26 days from its next quarterly update.
The Zacks Consensus Estimate for Woodward is $1.31, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +7.91%.
Because both stocks hold a positive Earnings ESP, FSLY and WWD could potentially post earnings beats in their next reports.
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 >>