Irrespective of whether it is a start-up or a renowned company, earnings growth is the highest priority for any organization. This is because if the company doesn’t make money, it won’t last over the long run. So, what’s earnings growth?
Study a company’s revenues over a given period of time, subtract the cost of production, and you have earnings. By the way, this is also considered the most important variable influencing the share price. But, expectations of earnings play a noteworthy role.
Earnings Estimates & Share Price Movements
Frequently, we have seen a decline in the stock price despite earnings growth and a rally in price following an earnings decline. This is largely the result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, investors need to buy stocks with historical earnings growth that are also seeing a rise in quarterly and annual earnings estimates.
Screening Measures:
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
Zacks Rank less than or equal to 2
(Only Zacks’ ‘Buys’ and ‘Strong Buys’ are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)
5-Year Historical EPS Growth (%) greater than X-Industry
(stocks with a strong EPS growth history).
% Change EPS F(0)/F(-1) greater than or equal to 5
(companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).
% Change Q1 Estimates over the last 4 weeks greater than zero
(stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks).
% Change F1 Estimates over the last 1 week greater than zero
(stocks that have seen their annual earnings estimates revised higher in the last 1 week).
% Change F1 Estimates over the last 4 weeks greater than zero
(stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).
The above criteria narrowed down the universe of around 7,839 stocks to only four. Here are the stocks:
Olympic Steel
ZEUS
is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products. Olympic Steel currently has a Zacks Rank #1 (Strong Buy).
ZUES’ earnings growth rate over the past five-year period is 98.4%. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Enphase Energy
ENPH
is a global energy technology company that delivers energy management technology for the solar industry. Zacks Rank #2 (Buy) ENPH’s expected earnings growth rate for the current year is 80.5%.
StoneX Group
SNEX
provides financial services. Currently, StoneX Group sports a Zacks Rank #1. SNEX’s expected earnings growth rate for the next year is 2.8%.
W.R. Berkley
WRB
is one of the nation’s largest commercial lines property casualty insurance providers. W.R. Berkley has a Zacks Rank #1. WRB’s expected earnings growth rate for the current year is 26.2%.
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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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