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Why Investors Need to Take Advantage of These 2 Finance Stocks Now
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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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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 Toronto-Dominion Bank?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Toronto-Dominion Bank (TD - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.50 a share, just one day from its upcoming earnings release on August 22, 2024.
TD has an Earnings ESP figure of +0.56%, which, as explained above, is calculated by taking the percentage difference between the $1.50 Most Accurate Estimate and the Zacks Consensus Estimate of $1.49. Toronto-Dominion Bank 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.
TD is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Progressive (PGR - Free Report) as well.
Slated to report earnings on October 11, 2024, Progressive holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.99 a share 51 days from its next quarterly update.
Progressive's Earnings ESP figure currently stands at +9.95% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.72.
TD and PGR'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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Why Investors Need to Take Advantage of These 2 Finance Stocks Now
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.
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.
The ability to identify stocks that are likely to top quarterly earnings expectations can be profitable, but it's no simple task. Here at Zacks, our Earnings ESP filter helps make things easier.
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.
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 Toronto-Dominion Bank?
Now that we understand what the ESP is and how beneficial it can be, let's dive into a stock that currently fits the bill. Toronto-Dominion Bank (TD - Free Report) earns a #3 (Hold) right now and its Most Accurate Estimate sits at $1.50 a share, just one day from its upcoming earnings release on August 22, 2024.
TD has an Earnings ESP figure of +0.56%, which, as explained above, is calculated by taking the percentage difference between the $1.50 Most Accurate Estimate and the Zacks Consensus Estimate of $1.49. Toronto-Dominion Bank 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.
TD is part of a big group of Finance stocks that boast a positive ESP, and investors may want to take a look at Progressive (PGR - Free Report) as well.
Slated to report earnings on October 11, 2024, Progressive holds a #2 (Buy) ranking on the Zacks Rank, and it's Most Accurate Estimate is $2.99 a share 51 days from its next quarterly update.
Progressive's Earnings ESP figure currently stands at +9.95% after taking the percentage difference between its Most Accurate Estimate and its Zacks Consensus Estimate of $2.72.
TD and PGR'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 >>