Breaking News
0

Beyond Earnings Growth: Bet On Beat With These 5 Stocks

By Zacks Investment ResearchJun 19, 2019 06:24AM ET
www.investing.com/analysis/beyond-earnings-growth-bet-on-beat-with-these-5-stocks-200432785
Beyond Earnings Growth: Bet On Beat With These 5 Stocks
By Zacks Investment Research   |  Jun 19, 2019 06:24AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Plain and simple earnings growth may no longer entice investors. Now, earnings improvement (no matter how big it is) seems inadequate for solid moves in the market. It is the “BEAT” that matters the most and leads one to a lucrative investment.

What is Earnings Beat?

A positive earnings surprise or earnings beat is typically the case when actual or reported earnings come in above the consensus estimate. Historically, if a company’s earnings manage to beat market expectations, its stock surges post release.

This is becauseinvestors always try to take positions ahead of time and look for stocks that are likely to come up with stellar performances. Now, since Wall Street analysts project earnings of companies after much deliberation, their estimates act as investment leads.

Why to Give Earnings Beat So Much of Precedence?

After all, only earnings beat can give investors a clear picture of a company’s strength when an industry-wide earnings recession is felt.

Also, a 20% earnings rise (though apparently looks good) doesn’t tell you everything about the company’s performance. This might represent decelerating earnings growth momentum over the years or quarters, raising questions over the company’s fundamentals.

Also, seasonal fluctuations come into play at times. If a company’s Q1 is seasonally weak and Q4 is strong, then it is likely to report a sequential earnings decline. In such cases, growth rates are misleading while judging the true health of a company.

On the other hand, analysts put together their insights and a company’s guidance when giving an earnings estimate. Thus, outperforming that estimate is almost equivalent to beating the company’s own expectation as well as market perception.

How to Find Stocks that Can Beat?

Now, since it is difficult to foretell if a company will beat or miss in the upcoming earnings season, investors can check the earnings surprise history. An impressive track in this regard generally acts as a catalyst in sending a stock higher. It indicates the company’s consistency in surpassing estimates. And investors generally believe that the company will have the same trick up its sleeve or in other words is smart enough to beat on earnings in its next release.

The Winning Strategy

In order to shortlist stocks that are likely to come up with an earnings surprise, we chose the following as our primary screening parameters.

Last EPS Surprise greater than or equal to 5%: Stocks delivering positive surprise in the last quarter tend to surprise again.

Average EPS Surprise in the last four quarters greater than 10%: We lifted the bar for outperformance slight higher by setting the average earnings surprise for the last four quarters at 20%.

Average EPS Surprise in the last two quarters greater than 10%: This points to a more consistent surprise history and makes the case for another surprise even stronger.

In addition, we place a few other criteria that push up the chance of a positive surprise.

Zacks Rank less than or equal to 2: Only companies with a Zacks Rank #1 (Strong Buy) or 2 (Buy) rating can get through.

Earnings ESP greater than zero: A stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for an earnings beat to happen, as per our proven model.

In order to zero in on those that have long-term growth potential and high trading liquidity we have added the following parameters too:

Next 3–5 Years Estimated EPS Growth (Per Year) greater than 5%: Solid expected earnings growth exhibits the stock’s long-term growth prospects.

Average 20-day Volume greater than 100,000: High trading volume implies that the stocks have adequate liquidity.

A handful of criteria narrowed down the universe from over 7,700 stocks to 11.

Here are five out of the 11 stocks:

OSI Systems, Inc. (NASDAQ:OSIS) : This Zacks Rank #1 company is a vertically integrated designer and manufacturer of specialized electronic systems, and components for critical applications in the homeland security, healthcare, defense, and aerospace industries. The stock comes from a top-ranked Zacks industry (top 33%). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hasbro Inc. (NASDAQ:HAS) : This Zacks Rank #2 company is a global leader in children's and family leisure time, and entertainment products and services. The stock comes from a top-ranked Zacks industry (top 21%).

Stitch Fix Inc. (NASDAQ:SFIX) : This provider of an online subscription and personal shopping platform holds a Zacks Rank #2. The stock comes from a top-ranked Zacks industry (top 32%).

Asure Software Inc (NASDAQ:ASUR) : Asure Software Inc., formerly Forgent Networks, Inc., is a provider of web-based workforce management solutions. The stock has a Zacks Rank #1 and belongs to a top-ranked Zacks industry (top 13%).

Under Armour Inc. (NYSE:UAA) : Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. The stock has a Zacks Rank #2 and comes from a top-ranked Zacks Rank sector (top 50%).

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.



Asure Software Inc (ASUR): Free Stock Analysis Report

OSI Systems, Inc. (OSIS): Free Stock Analysis Report

Under Armour, Inc. (UAA): Free Stock Analysis Report

Hasbro, Inc. (HAS): Free Stock Analysis Report

Stitch Fix, Inc. (SFIX): Free Stock Analysis Report

Original post

Zacks Investment Research
Beyond Earnings Growth: Bet On Beat With These 5 Stocks
 
Beyond Earnings Growth: Bet On Beat With These 5 Stocks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email