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5 Best Stocks to Invest in for Solid Earnings Acceleration
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Persistent earnings growth enthralls almost everyone in the investment world, right from the top brass to research analysts. This is because earnings are a measure of the money a company is making.
Still, earnings acceleration works better when it comes to lifting the stock price. Studies have shown that most successful stocks have seen an acceleration in earnings before an uptick in the stock price.
Earnings acceleration, in fact, is the incremental growth in a company’s earnings per share (EPS). In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated time, it can be called earnings acceleration.
In case of earnings growth, you pay for something that is already reflected in the stock price. But earnings acceleration helps spot stocks that haven’t yet caught the attention of investors. Once secured, it will invariably lead to a rally in the 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, at times, drag prices down.
Screening Parameters
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 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 7,735 stocks to only eight. Here are the top five stocks:
MacroGenics (MGNX - Free Report) is a biopharmaceutical company. It is focused on discovering and developing innovative monoclonal antibody-based therapeutics. MGNX currently has a Zacks Rank #2 (Buy). MGNX’s expected earnings growth rate for the current year is 50.2%. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Olink Holding provides a platform of products and services which are deployed across major biopharmaceutical companies and clinical and academic institutions to deepen the understanding of real-time human biology. OLK currently has a Zacks Rank #1. OLK’s expected earnings growth rate for the current year is 69.8%.
NerdWallet, Inc. (NRDS - Free Report) provides consumers with financial information. NRDS currently has a Zacks Rank #2. NRDS’s expected earnings growth rate for the current year is 74.4%.
LiveRamp (RAMP - Free Report) operates as a marketing technology company. RAMP currently has a Zacks Rank #2. RAMP’s expected earnings growth rate for the current year is 27.1%.
LivePerson (LPSN - Free Report) is the leading provider of mobile and online messaging business solutions, enabling a meaningful connection between brands and consumers. Zacks Rank #2 LPSN’s expected earnings growth rate for the current year is 62.1%.
You can sign 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.
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5 Best Stocks to Invest in for Solid Earnings Acceleration
Persistent earnings growth enthralls almost everyone in the investment world, right from the top brass to research analysts. This is because earnings are a measure of the money a company is making.
Still, earnings acceleration works better when it comes to lifting the stock price. Studies have shown that most successful stocks have seen an acceleration in earnings before an uptick in the stock price.
Earnings acceleration, in fact, is the incremental growth in a company’s earnings per share (EPS). In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated time, it can be called earnings acceleration.
In case of earnings growth, you pay for something that is already reflected in the stock price. But earnings acceleration helps spot stocks that haven’t yet caught the attention of investors. Once secured, it will invariably lead to a rally in the 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, at times, drag prices down.
Screening Parameters
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 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 7,735 stocks to only eight. Here are the top five stocks:
MacroGenics (MGNX - Free Report) is a biopharmaceutical company. It is focused on discovering and developing innovative monoclonal antibody-based therapeutics. MGNX currently has a Zacks Rank #2 (Buy). MGNX’s expected earnings growth rate for the current year is 50.2%. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Olink Holding provides a platform of products and services which are deployed across major biopharmaceutical companies and clinical and academic institutions to deepen the understanding of real-time human biology. OLK currently has a Zacks Rank #1. OLK’s expected earnings growth rate for the current year is 69.8%.
NerdWallet, Inc. (NRDS - Free Report) provides consumers with financial information. NRDS currently has a Zacks Rank #2. NRDS’s expected earnings growth rate for the current year is 74.4%.
LiveRamp (RAMP - Free Report) operates as a marketing technology company. RAMP currently has a Zacks Rank #2. RAMP’s expected earnings growth rate for the current year is 27.1%.
LivePerson (LPSN - Free Report) is the leading provider of mobile and online messaging business solutions, enabling a meaningful connection between brands and consumers. Zacks Rank #2 LPSN’s expected earnings growth rate for the current year is 62.1%.
You can sign 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