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These 2 Finance Stocks Could Beat Earnings: Why They Should Be on Your Radar
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Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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.
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 Palomar?
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. Palomar (PLMR - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.15 a share 19 days away from its upcoming earnings release on August 7, 2024.
Palomar's Earnings ESP sits at +3%, which, as explained above, is calculated by taking the percentage difference between the $1.15 Most Accurate Estimate and the Zacks Consensus Estimate of $1.11. PLMR is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PLMR is just one of a large group of Finance stocks with a positive ESP figure. Royalty Pharma (RPRX - Free Report) is another qualifying stock you may want to consider.
Royalty Pharma is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 13, 2024. RPRX's Most Accurate Estimate sits at $0.96 a share 25 days from its next earnings release.
Royalty Pharma's Earnings ESP figure currently stands at +1.41% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.95.
PLMR and RPRX'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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These 2 Finance Stocks Could Beat Earnings: Why They Should Be on Your Radar
Quarterly financial reports play a vital role on Wall Street, as they help investors see how a company has performed and what might be coming down the road in the near-term. And out of all of the metrics and results to consider, earnings is one of the most important.
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.
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.
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 Palomar?
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. Palomar (PLMR - Free Report) holds a #2 (Buy) at the moment and its Most Accurate Estimate comes in at $1.15 a share 19 days away from its upcoming earnings release on August 7, 2024.
Palomar's Earnings ESP sits at +3%, which, as explained above, is calculated by taking the percentage difference between the $1.15 Most Accurate Estimate and the Zacks Consensus Estimate of $1.11. PLMR is also part of a large group of stocks that boast a positive ESP. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported.
PLMR is just one of a large group of Finance stocks with a positive ESP figure. Royalty Pharma (RPRX - Free Report) is another qualifying stock you may want to consider.
Royalty Pharma is a Zacks Rank #3 (Hold) stock, and is getting ready to report earnings on August 13, 2024. RPRX's Most Accurate Estimate sits at $0.96 a share 25 days from its next earnings release.
Royalty Pharma's Earnings ESP figure currently stands at +1.41% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $0.95.
PLMR and RPRX'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 >>