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3 Stocks With Accelerating Earnings Poised to Soar in October

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Key Takeaways

  • Western Digital expects 96% earnings growth this year, alongside strong earnings acceleration.
  • PACCAR projects 18% current-year earnings growth as its EPS growth rates accelerate.
  • Sprout Social expects 37.8% earnings growth this year, with earnings acceleration supporting its outlook.

Investors often view consistent earnings growth as a sign of a company’s solid profitability. However, an even more compelling indicator is earnings acceleration, which can drive stock price gains. Historical market research has found that many top-performing stocks exhibit earnings acceleration before their share prices began moving higher. 

To that end, Western Digital Corporation (WDC - Free Report) , PACCAR Inc (PCAR - Free Report) and Sprout Social, Inc. (SPT - Free Report) are showing strong earnings acceleration and strong upside potential, making them compelling buys in October. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Acceleration: What Investors Should Know 

Earnings acceleration refers to the incremental growth in a company’s earnings per share (EPS). Put simply, if a company’s quarter-over-quarter earnings growth rate increases over a given period, it can be called earnings acceleration. 

In the case of earnings growth, you pay for something that is already reflected in the stock price. However, earnings acceleration helps identify stocks that haven’t yet caught investors’ attention and, once secured, will invariably lead to a rally in 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. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may drag prices down.

Find Winning Stocks Faster With Research Wizard

Look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the previous periods’ growth rates. The projected EPS growth rate for the upcoming quarter is expected to exceed that of prior periods.

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 the universe of around 7,735 stocks to only 16. Here are the top three stocks:

Western Digital  

Western Digital develops and sells HDD-based data storage devices and solutions across global markets. WDC’s expected earnings growth rate for the current year is 96%.  

PACCAR  

PACCAR designs, manufactures, and sells light-, medium-, and heavy-duty commercial trucks worldwide. PACCAR’s expected earnings growth rate for the current year is 18%.  

Sprout Social 

Sprout Social provides a web-based social media management platform worldwide. SPT’s expected earnings growth rate for the current year is 37.8%.  


 

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