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Find Strong Stocks to Buy with this 'First Profit' Screen

·5 min read

August’s market theme centered around the quick reversal of peak inflation bets. Wall Street started September with those same fears at top of mind as investors grow increasingly worried about inflation and the Fed’s hawkish stance on interest rates.

Wall Street began a holiday-shortened week by sending 10-year U.S. Treasury yields to 3.33% after another strong jobs report. The U.S. labor market remains strong and employers are still struggling to hire enough workers, driving up wages and inflation.  

Tons of factors are contributing to the current bout of 40-year high inflation, and many of them are out of the Fed’s hands. This is why Wall Street is growing worried that Jay Powell and the Fed will continue to ramp up their rate hikes in September and beyond. Powell has also been unwavering in his commitment to tightening until there are sustained signs of cooling inflation.

Stubbornly-high inflation has wide-ranging impacts on consumers, companies, corporate earnings, interest rates, and beyond. Rising U.S. Treasury yields are also being driven, in part, by a flight to safety amid global economic slowdown worries.

Thankfully, select pockets of the market are performing well so far this year. Today, we utilized our Zacks ‘First Profit’ screen to identify potentially winning stocks that turned things around recently and might continue to trend in the right direction.

First Profit

The idea is to search for companies that recently reported their first quarterly profit. More specifically, the screen searches for firms that just posted their first profit last quarter, after not posting a profit for at least the previous four quarters.

Finding companies that recently reported their first profits help investors find stocks that can prove to be big winners. These companies may vary widely. Some of the firms might be new, and this recent profit is perhaps the only profit in its short history.

Meanwhile, other companies might have held an impressive and long history of quarterly profitability, but for whatever reason haven't seen a profit in a while. Therefore, the return to profit could spark a turning point that management had promised or Wall Street had been clamoring for.

The concept is relatively simple: if the trend has been one of improvement, there is a solid chance the trend will continue. This is true whether a company has been profitable, or is just reaching that key inflection point.

And that’s what we are screening for today…

• EPS for the previous 4 Quarters less than or equal to 0

(This means in each of the previous 4 quarters (except the most recently reported quarter) the company has reported earnings of less than or equal to zero, i.e., no profit.)

• EPS for the recently reported quarter greater than 0

(This time, the company reported earnings greater than zero, meaning they finally showed a profit.)

• Current Price greater than or equal to 5

(Stocks that are trading for less than $5 are more speculative.)

The screen is pretty simple, yet powerful. Here are two of the roughly 35 stocks that made it through this week's screen…

Scorpio Tankers STNG

Scorpio Tankers is in the petroleum transportation business. STNG’s fleet is made up of over 130 wholly-owned, finance leased, or bareboat chartered-in tankers which transport refined petroleum products around the globe. Scorpio Tankers aims to provide the best risk-adjusted returns in the industry. Scorpio Tankers is also focused heavily on increasing fuel efficiency, which should help it over the long haul.

Scorpio Tankers is part of the Transportation – Shipping space that ranks in the top 18% of over 250 Zacks industries right now and it’s projected to post huge top and bottom line growth this year. Scorpio Tankers boosted its EPS outlook for FY22 and FY23 to help it land a Zacks Rank #1 (Strong Buy) amid concerns about inflation and slowing economic growth. Plus, STNG shares have surged over 200% in 2022.

Liberty Energy LBRT

Liberty Energy is a North American-based oilfield services firm that offers a diverse set of completion services and technologies geared toward onshore oil and natural gas exploration and production companies. Liberty Energy aims to sell safe, efficient, and high-quality hydraulic fracturing, engineering, and wireline services. The company said the frac market is strong amid a need for more energy around the globe.

LBRT announced a share repurchase program of up to $250 million not too long ago. Plus, Liberty Energy has surged roughly 50% in 2022, and it still trades nearly 40% below its current Zacks consensus price target.

Liberty Energy topped Q2 earnings estimates and raised its guidance, with its upward earnings revisions helping it land a Zacks Rank #1 (Strong Buy) right now. Zacks estimates call for Liberty Energy to post strong sales and EPS growth this year and next. The booming energy sector helps Liberty Energy’s Oil and Gas - Field Services industry land in the top 9% of over 250 Zacks industries.

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

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

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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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