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These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar
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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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Silicon Motion?
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. Silicon Motion (SIMO - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1 a share 22 days away from its upcoming earnings release on August 1, 2024.
By taking the percentage difference between the $1 Most Accurate Estimate and the $0.92 Zacks Consensus Estimate, Silicon Motion has an Earnings ESP of +8.99%. Investors should also know that SIMO 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.
SIMO is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Shopify (SHOP - Free Report) as well.
Shopify, which is readying to report earnings on August 7, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.23 a share, and SHOP is 28 days out from its next earnings report.
The Zacks Consensus Estimate for Shopify is $0.21, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +11.72%.
Because both stocks hold a positive Earnings ESP, SIMO and SHOP could potentially post earnings beats in their next reports.
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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These 2 Computer and Technology Stocks Could Beat Earnings: Why They Should Be on Your Radar
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.
Life and the stock market are both about expectations, and rising above what is expected is often rewarded, while falling short can come with negative consequences. Investors might want to try to capture stronger returns by finding positive 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 Earnings ESP is more formally known as the Expected Surprise Prediction, and it aims to grab the inside track on the latest analyst estimate revisions ahead of a company's report. The idea is relatively intuitive as a newer projection might be based on more complete information.
The core of the ESP model is comparing the Most Accurate Estimate to the Zacks Consensus Estimate, where the resulting percentage difference between the two equals the Expected Surprise Prediction. The Zacks Rank is also factored into the ESP metric to better help find companies that appear poised to top their next bottom-line consensus estimate, which will hopefully help lift the stock price.
Bringing together a positive earnings ESP alongside a Zacks Rank #3 (Hold) or better has helped stocks report a positive earnings surprise 70% of the time. Furthermore, by using these parameters, investors have seen 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 Silicon Motion?
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. Silicon Motion (SIMO - Free Report) holds a #3 (Hold) at the moment and its Most Accurate Estimate comes in at $1 a share 22 days away from its upcoming earnings release on August 1, 2024.
By taking the percentage difference between the $1 Most Accurate Estimate and the $0.92 Zacks Consensus Estimate, Silicon Motion has an Earnings ESP of +8.99%. Investors should also know that SIMO 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.
SIMO is part of a big group of Computer and Technology stocks that boast a positive ESP, and investors may want to take a look at Shopify (SHOP - Free Report) as well.
Shopify, which is readying to report earnings on August 7, 2024, sits at a Zacks Rank #3 (Hold) right now. It's Most Accurate Estimate is currently $0.23 a share, and SHOP is 28 days out from its next earnings report.
The Zacks Consensus Estimate for Shopify is $0.21, and when you take the percentage difference between that number and its Most Accurate Estimate, you get the Earnings ESP figure of +11.72%.
Because both stocks hold a positive Earnings ESP, SIMO and SHOP could potentially post earnings beats in their next reports.
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 >>