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This 1 Computer and Technology Stock Could Beat Earnings: Why It 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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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 Okta?
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. Okta (OKTA - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.23 a share 21 days away from its upcoming earnings release on November 30, 2022.
OKTA has an Earnings ESP figure of +3.16%, which, as explained above, is calculated by taking the percentage difference between the -$0.23 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.24. Okta is one of a large database 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.
OKTA is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Teradyne (TER - Free Report) .
Teradyne is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 25, 2023. TER's Most Accurate Estimate sits at $0.75 a share 77 days from its next earnings release.
For Teradyne, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.75 is +0.22%.
OKTA and TER's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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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This 1 Computer and Technology Stock Could Beat Earnings: Why It 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.
Now that we know how important earnings and earnings surprises are, it's time to show investors how to take advantage of these events to boost their returns by utilizing the Zacks Earnings ESP filter.
The Zacks Earnings ESP, Explained
The Zacks Earnings ESP, or Expected Surprise Prediction, aims to find earnings surprises by focusing on the most recent analyst revisions. The basic premise is that if an analyst reevaluates their earnings estimate ahead of an earnings release, it means they likely have new information that could possibly be more accurate.
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 Okta?
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. Okta (OKTA - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at -$0.23 a share 21 days away from its upcoming earnings release on November 30, 2022.
OKTA has an Earnings ESP figure of +3.16%, which, as explained above, is calculated by taking the percentage difference between the -$0.23 Most Accurate Estimate and the Zacks Consensus Estimate of -$0.24. Okta is one of a large database 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.
OKTA is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Teradyne (TER - Free Report) .
Teradyne is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on January 25, 2023. TER's Most Accurate Estimate sits at $0.75 a share 77 days from its next earnings release.
For Teradyne, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.75 is +0.22%.
OKTA and TER's positive ESP figures tell us that both stocks have a good chance at beating analyst expectations in their next earnings report.
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 >>