One of the most important variables influencing the share price of a company is earnings growth. After all, earnings growth is the highest priority for the top brass of any organization. This is because if the company doesn’t make money, it won’t last over the long haul.
Study a company’s revenues over a given period, subtract the cost of production, and you have earnings. But, expectations of earnings also play a significant role.
Earnings Estimates & Share Price Movements
Often, we have seen a decline in the stock price despite earnings growth and a rally in price following an earnings decline. This is largely the result of a company’s earnings failing to meet market expectations.
Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool, while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, it is important for investors to buy stocks that have historical earnings growth and are seeing a rise in quarterly and annual earnings estimates.
In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:
Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and '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 with a strong EPS growth history).
% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth 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 7,839 stocks to only 28. Here are the top three stocks that stand out:
Medpace MEDP is a scientifically-driven, global, full-service clinical contract research organization. Medpace currently has a Zacks Rank #2 (Buy). MEDP’s expected earnings growth rate for the current year is 22.7%.
Texas Pacific Land TPL generates revenues from pipeline, power line and utility easements, commercial leases, material sales and seismic and temporary permits related to land uses, including midstream infrastructure projects and hydrocarbon processing facilities. Texas Pacific Land currently has a Zacks Rank #1 (Strong Buy). TPL’s expected earnings growth rate for the current year is 74.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Delek US Holdings DK is an independent refiner, transporter and marketer of petroleum products. Delek US Holdings Land currently has a Zacks Rank #1. DK’s expected earnings growth rate for the current year is nearly 302%.
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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.
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Delek US Holdings, Inc. (DK) : Free Stock Analysis Report
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Texas Pacific Land Corporation (TPL) : Free Stock Analysis Report
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