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Here's How Investors Can Find Strong Computer and Technology Stocks with the Zacks ESP Screener
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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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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 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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 Analog Devices?
The final step today is to look at a stock that meets our ESP qualifications. Analog Devices (ADI - Free Report) earns a #3 (Hold) 11 days from its next quarterly earnings release on November 22, 2022, and its Most Accurate Estimate comes in at $2.61 a share.
ADI has an Earnings ESP figure of +1.1%, which, as explained above, is calculated by taking the percentage difference between the $2.61 Most Accurate Estimate and the Zacks Consensus Estimate of $2.58. Analog Devices 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.
ADI is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Fortinet (FTNT - Free Report) .
Fortinet is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 2, 2023. FTNT's Most Accurate Estimate sits at $0.39 a share 83 days from its next earnings release.
For Fortinet, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.39 is +0.88%.
ADI and FTNT's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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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Here's How Investors Can Find Strong Computer and Technology Stocks with the Zacks ESP Screener
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.
We know earnings results are vital, but how a company performs compared to bottom line expectations can be even more important when it comes to stock prices, especially in the near-term. This means that investors might want to take advantage of these earnings surprises.
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 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.
In fact, when we combined a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time. Perhaps most importantly, using these parameters has helped produce 28.3% 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 Analog Devices?
The final step today is to look at a stock that meets our ESP qualifications. Analog Devices (ADI - Free Report) earns a #3 (Hold) 11 days from its next quarterly earnings release on November 22, 2022, and its Most Accurate Estimate comes in at $2.61 a share.
ADI has an Earnings ESP figure of +1.1%, which, as explained above, is calculated by taking the percentage difference between the $2.61 Most Accurate Estimate and the Zacks Consensus Estimate of $2.58. Analog Devices 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.
ADI is one of just a large database of Computer and Technology stocks with positive ESPs. Another solid-looking stock is Fortinet (FTNT - Free Report) .
Fortinet is a Zacks Rank #2 (Buy) stock, and is getting ready to report earnings on February 2, 2023. FTNT's Most Accurate Estimate sits at $0.39 a share 83 days from its next earnings release.
For Fortinet, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.39 is +0.88%.
ADI and FTNT's positive ESP metrics may signal that a positive earnings surprise for both stocks is on the horizon.
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 >>