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Buy 4 Stocks Riding High on Superb Earnings Acceleration
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As we are in the thick of the Q4 earnings season, investors should ideally scoop up stocks that are ready to make a big move. Better-than-expected earnings results mostly lead to an uptick in the share price. Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of the money a company is making. Earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
But, earnings acceleration works even better in boosting the stock price. Studies have shown that a majority of successful stocks had seen acceleration in earnings before a positive stock price movement.
Finding Future Outperformers
Basically, earnings acceleration is the incremental growth in 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.
If you pick a stock judging its earnings growth trajectory then you are paying for something that has already been reflected in the stock price. Earnings acceleration, on the other hand, considers both direction and magnitude of growth rates. This helps you in picking stocks that are yet to gain significant attention from investors, and consequently a solid price increase is still in the cards.
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. On the other hand, 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.
Hence, earnings acceleration should be viewed as a key metric for share price outperformance.
The Winning Strategy
Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the growth rates of the previous periods. 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 the 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 7,898 stocks to only 14. Here are the top four stocks:
Exelixis, Inc. (EXEL - Free Report) is a biopharmaceutical company engaged in the discovery, development and commercialization of new medicines. The company’s estimated growth rate for this year is 117.8%, way higher than the industry’s gain of 10.3%. The Zacks Consensus Estimate for its current year earnings increased 2.1% over the last 60 days. Exelixis has a Zacks Rank #2 (Buy).
RPC, Inc. (RES - Free Report) provides a range of oilfield services and equipment for oil and gas companies involved in the exploration, production, and development of oil and gas properties. The company’s estimated growth rate for this year is 128.7%, way more than the industry’s addition of 7.5%. The Zacks Consensus Estimate for its current year earnings surged 416.7% over the last 60 days. RPC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Unit Corporation , together with its subsidiaries, operates as an oil and natural gas contract drilling company primarily in the U.S. The company’s estimated growth rate for this year is 357.5%, considerably higher than the industry’s gain of 34.4%. The Zacks Consensus Estimate for its current year earnings advanced 12% over the last 60 days. Unit Corporation has a Zacks Rank #2.
Fortress Transportation and Infrastructure Investors LLC (FTAI - Free Report) owns and acquires infrastructure and related equipment for the transportation of goods and people in Africa, Asia, Europe, South America, and North America. The company’s estimated growth rate for this year is 357.1%, substantially higher than the industry’s addition of 24.2%. The Zacks Consensus Estimate for its current year earnings rose 12.5% over the last 60 days. Fortress Transportation and Infrastructure has a Zacks Rank #2.
You can get the rest of the stocks on this list by signing 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.
The 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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Buy 4 Stocks Riding High on Superb Earnings Acceleration
As we are in the thick of the Q4 earnings season, investors should ideally scoop up stocks that are ready to make a big move. Better-than-expected earnings results mostly lead to an uptick in the share price. Right from the top brass to research analysts, earnings growth captivates all. This is because earnings are a measure of the money a company is making. Earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.
But, earnings acceleration works even better in boosting the stock price. Studies have shown that a majority of successful stocks had seen acceleration in earnings before a positive stock price movement.
Finding Future Outperformers
Basically, earnings acceleration is the incremental growth in 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.
If you pick a stock judging its earnings growth trajectory then you are paying for something that has already been reflected in the stock price. Earnings acceleration, on the other hand, considers both direction and magnitude of growth rates. This helps you in picking stocks that are yet to gain significant attention from investors, and consequently a solid price increase is still in the cards.
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. On the other hand, 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.
Hence, earnings acceleration should be viewed as a key metric for share price outperformance.
The Winning Strategy
Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the growth rates of the previous periods. 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 the 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 7,898 stocks to only 14. Here are the top four stocks:
Exelixis, Inc. (EXEL - Free Report) is a biopharmaceutical company engaged in the discovery, development and commercialization of new medicines. The company’s estimated growth rate for this year is 117.8%, way higher than the industry’s gain of 10.3%. The Zacks Consensus Estimate for its current year earnings increased 2.1% over the last 60 days. Exelixis has a Zacks Rank #2 (Buy).
RPC, Inc. (RES - Free Report) provides a range of oilfield services and equipment for oil and gas companies involved in the exploration, production, and development of oil and gas properties. The company’s estimated growth rate for this year is 128.7%, way more than the industry’s addition of 7.5%. The Zacks Consensus Estimate for its current year earnings surged 416.7% over the last 60 days. RPC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Unit Corporation , together with its subsidiaries, operates as an oil and natural gas contract drilling company primarily in the U.S. The company’s estimated growth rate for this year is 357.5%, considerably higher than the industry’s gain of 34.4%. The Zacks Consensus Estimate for its current year earnings advanced 12% over the last 60 days. Unit Corporation has a Zacks Rank #2.
Fortress Transportation and Infrastructure Investors LLC (FTAI - Free Report) owns and acquires infrastructure and related equipment for the transportation of goods and people in Africa, Asia, Europe, South America, and North America. The company’s estimated growth rate for this year is 357.1%, substantially higher than the industry’s addition of 24.2%. The Zacks Consensus Estimate for its current year earnings rose 12.5% over the last 60 days. Fortress Transportation and Infrastructure has a Zacks Rank #2.
You can get the rest of the stocks on this list by signing 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.
The 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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »