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 other words, earnings acceleration is the incremental growth in a company’s earnings per share (EPS).
Studies have shown that a majority of successful stocks had seen an acceleration in earnings before an uptick in the stock price. In the 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 the direction and magnitude of growth rates.
An increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period. 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 nine. Here are the three stocks that stand out:
Sensus Healthcare
SRTS
is a medical device company. The company has a Zacks Rank #1 (Strong Buy). The company’s expected earnings growth rate for the next year is a whopping 1,400%. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Dorman Products
DORM
is a leading supplier of Dealer Exclusive replacement parts to the Automotive, Medium and Heavy-Duty Aftermarkets. The company has a Zacks Rank #2 (Buy). The company’s expected earnings growth rate for the next year is a steady 15.6%.
Sociedad Quimica y Minera
SQM
produces fertilizer and iodine and manufactures industrial chemicals and iodine derivative products. The company has a Zacks Rank #1. The company’s expected earnings growth rate for the next year is a solid 88.3%.
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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