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from the world of economics and financeRegardless of whether it is a start-up or a renowned company, earnings growth is the top priority for any organization. This is because if the company doesn’t make money, it won’t survive.
So, what’s earnings growth? Study a company’s revenues over a given period, subtract the production cost, and you have earnings. By the way, this is also considered the most important variable influencing the share price. But, expectations of earnings play a striking role.
Nonetheless, stocks such as ResMed RMD, Badger Meter BMI, Leidos LDOS and Ingersoll Rand IR are currently exhibiting superb earnings growth.
Frequently, 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’ opinions on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. So earnings estimates serve as a valuable tool for making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.
Investors should be on the lookout for stocks ready to make a big move. Hence, investors need to buy stocks with historical earnings growth and are seeing a rise in quarterly and annual earnings estimates.
We use that basis to determine our stock selections above using Zack's Research Wizard Tool.
To shortlist stocks that have striking earnings growth and positive estimate revisions, we analyzed by 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 the universe of around 7,839 stocks to only six. Here are the top four stocks:
ResMed holds a major position as a designer, manufacturer and distributor worldwide for generators, masks and related accessories. The expected earnings growth rate for the current year is 19.6%. RMD currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Badger Meter provides flow measurement, control and communications solutions, serving water and gas utilities, municipalities and industrial customers worldwide. The company has a Zacks Rank #2 at present. BMI’s expected earnings growth rate for the current year is 25.5%.
Leidos is a global science and technology leader that serves the defense, intelligence, civil and health markets. The company currently has a Zacks Rank #2. LDOS’ expected earnings growth rate for the current year is 19.9%.
Ingersoll Rand is a global industrial company. The company has a Zacks Rank #2. IR’s expected earnings growth rate for the current year is 11.8%.
You can sign 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.