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How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises
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Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Pinterest?
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. Pinterest (PINS - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.02 a share two days away from its upcoming earnings release on April 27, 2023.
By taking the percentage difference between the $0.02 Most Accurate Estimate and the $0 Zacks Consensus Estimate, Pinterest has an Earnings ESP of +600.01%. Investors should also know that PINS is one of a large group 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.
PINS is just one of a large group of Computer and Technology stocks with a positive ESP figure. Skyworks Solutions (SWKS - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on May 8, 2023, Skyworks Solutions holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.02 a share 13 days from its next quarterly update.
For Skyworks Solutions, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.02 is +0.15%.
PINS and SWKS' 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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How to Find Strong Computer and Technology Stocks Slated for Positive Earnings Surprises
Earnings are arguably the most important single number on a company's quarterly financial report. Wall Street clearly dives into all of the other metrics and management's input, but the EPS figure helps cut through all the noise.
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.
Most stocks, about 60%, fall into the #3 (Hold) category, and they are expected to perform in-line with the broader market. Stocks with a #2 (Buy) and #1 (Strong Buy) rating, or the top 15% and top 5% of stocks, respectively, should outperform the market, with Strong Buy stocks outperforming more than any other rank.
Should You Consider Pinterest?
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. Pinterest (PINS - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $0.02 a share two days away from its upcoming earnings release on April 27, 2023.
By taking the percentage difference between the $0.02 Most Accurate Estimate and the $0 Zacks Consensus Estimate, Pinterest has an Earnings ESP of +600.01%. Investors should also know that PINS is one of a large group 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.
PINS is just one of a large group of Computer and Technology stocks with a positive ESP figure. Skyworks Solutions (SWKS - Free Report) is another qualifying stock you may want to consider.
Slated to report earnings on May 8, 2023, Skyworks Solutions holds a #3 (Hold) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.02 a share 13 days from its next quarterly update.
For Skyworks Solutions, the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.02 is +0.15%.
PINS and SWKS' 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 >>