Right from the top brass to research analysts, constant earnings growth enthralls everyone. And why not? If the company doesn’t make money, it won’t stand the test of time. Take a company’s revenues over a given period of time, subtract the cost of production and you will have its earnings!
This metric is also considered to be the most noteworthy variable in influencing the share price. Better-than-expected earnings performances normally lead to a rally in the share price. However, in addition to actual earnings, expectations of earnings play a significant role in influencing the price of a stock.
Earnings Estimates Shape Share Prices
We have often seen a decline in the stock price despite earnings growth and a rally in the price following an earnings decline. This is largely a result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while taking investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
As the earnings season picks up pace, investors should be on the lookout for stocks that are ready to make a big move. Hence, it is important for investors to invest in stocks that have historical earnings growth and are also seeing a rise in quarterly and annual earnings estimates.
Screening Parameters:
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we added the following parameters:
Zacks Rank equal to 1 (Only Zacks' 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)
5-Year Historical EPS Growth (%) greater than X-Industry (Stocks that possess strong EPS growth history.)
% Change EPS F(0)/F(-1) greater than or equal to 5 (Companies that witnessed year-over-year earnings growth rate of 5% or more in the last reported fiscal.)
% Change Q1 Estimates over the last 4 weeks greater than zero (Stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks.)
% Change F1 Estimates over the last 1 week greater than zero (Stocks that have seen their annual earnings estimates revised higher in the last 1 week.)
% Change F1 Estimates over the last 4 weeks greater than zero (Stocks that have seen their annual earnings estimates revised higher in the last 4 weeks.)
The above criteria narrowed down the universe of around 7,886 stocks to only 11. Here are the top four stocks:
BioTelemetry, Inc. BEAT is a mobile and wireless medical technology company that provides cardiac and mobile blood glucose monitoring (BGM), centralized medical imaging, and original equipment manufacturing services for the healthcare and clinical research industries. The company’s estimated earnings growth rate for this year is 45.4%, higher than the industry’s projected gain of 26.9%.
Fair Isaac Corporation FICO develops analytic, software, and data management products and services that enable businesses to automate, enhance, and connect decisions. The company’s estimated earnings growth rate for this year is 31.1%, higher than the industry’s projected gain of 9.3%.
Comerica Incorporated CMA provides various financial products and services. The company operates through three segments: Business Bank, the Retail Bank and Wealth Management. The company’s estimated earnings growth rate for this year is 48.3%, higher than the industry’s projected gain of 27%.
Blue Hills Bancorp, Inc. BHBK operates as the bank holding company for Blue Hills Bank that provides financial services to individuals, families, small to mid-size businesses, government, and non-profit organizations in Massachusetts. The company’s estimated earnings growth rate for this year is 64.3%, higher than the industry’s projected gain of 24.7%.
Comerica Incorporated (CMA): Free Stock Analysis Report
Fair Isaac Corporation (FICO): Free Stock Analysis Report
Blue Hills Bancorp, Inc. (BHBK): Free Stock Analysis Report
BioTelemetry, Inc. (BEAT): Free Stock Analysis Report
