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5 Stocks to Watch Out For Remarkable Earnings Acceleration

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·5 min read
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Constant earnings growth captivates almost everyone, right from the top brass to research analysts. This is because earnings are a measure of the money a company is making. Still, earnings acceleration works even better when it comes to lifting the stock price. Studies have shown that a majority of successful stocks had seen acceleration in earnings before an uptick in the stock price.

Earnings acceleration, in fact, is the incremental growth in a company’s earnings per share (EPS). In other words, if the rate of a company’s quarter-over-quarter earnings growth increases within a stipulated frame of time, it can be called earnings acceleration.

In case of earnings growth, you pay for something that is already reflected in the stock price. But earnings acceleration helps spot stocks that haven’t caught the attention of investors yet, which once secured will invariably lead to a rally in the share price. This is because earnings acceleration considers both direction and magnitude of growth rates.

Increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period of time. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may at times drag prices down.

Screening Parameters

Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the growth rates of the previous periods. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.

EPS % Projected Growth (Q1)/(Q0) greater than EPS % Growth (Q0)/(Q-1): The projected growth rate for the current quarter (Q1) over the completed quarter (Q0) has to be greater than the growth rate from the completed quarter (Q0) over one quarter ago (Q-1).

EPS % Growth (Q0)/(Q-1) greater than EPS % Growth (Q-1)/(Q-2): The growth rate for the completed quarter (Q0) over one quarter ago (Q-1) has to be greater than the growth rate from one quarter ago (Q-1) over two quarters ago (Q-2).

EPS % Growth (Q-1)/(Q-2) greater than EPS % Growth (Q-2)/(Q-3): The growth rate from one quarter ago (Q-1) over two quarters ago (Q-2) has to be greater than the growth rate from two quarters ago (Q-2) over three quarters ago (Q-3).

In addition to this, we have added the following parameters:

Current Price greater than or equal to $5: This screens out low-priced stocks.

Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.

The above criteria narrowed down the universe of around 7,735 stocks to only 18. Here are the top five stocks:

Western Digital Corporation WDC is one of the largest hard disk drive (HDD) producers in the United States. The company currently has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the current year is nearly 26%. You can see the complete list of today’s Zacks #1 Rank stocks here.

TG Therapeutics, Inc. TGTX is a biopharmaceutical company focused on the acquisition, development and commercialization of pharmaceutical products for the treatment of cancer and other underserved therapeutic needs. The company currently has a Zacks Rank #3 (Hold). The company’s expected earnings growth rate for the current year is 9.9%.

DocuSign Inc. DOCU provides e-signature solutions. The company currently has a Zacks Rank #3. The company’s expected earnings growth rate for the current year is 86.7%.

Kaiser Aluminum Corporation KALU is a leading producer of semi-fabricated specialty aluminum products, serving customers worldwide with highly-engineered solutions for aerospace and high-strength, general engineering, and custom automotive and industrial applications. The company currently has a Zacks Rank #3. The company’s expected earnings growth rate for the current year is 154.5%.

United Insurance Holdings Corp. UIHC operates as a property and casualty insurance company. The company currently has a Zacks Rank #3. The company’s expected earnings growth rate for the current year is 91.4%.

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.

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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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Western Digital Corporation (WDC) : Free Stock Analysis Report
 
Kaiser Aluminum Corporation (KALU) : Free Stock Analysis Report
 
TG Therapeutics, Inc. (TGTX) : Free Stock Analysis Report
 
United Insurance Holdings Corp. (UIHC) : Free Stock Analysis Report
 
DocuSign Inc. (DOCU) : Free Stock Analysis Report
 
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