5 Stocks With Earnings Acceleration To Buy Now

In the middle of the Q1 earnings season, investors should ideally consider stocks that are ready to make a big move. Upbeat earnings results are more often than not followed by an uptick in the share price. Notably, earnings are essentially revenues that the company generates after deducting the cost of production over a given period of time.

But earnings acceleration works even better in boosting the stock price. Studies have shown that the majority of successful stocks had seen acceleration in earnings before a positive stock price movement.

Finding Future Outperformers

So, what is earnings acceleration? It 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. On the other hand, 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.

Hence, earnings acceleration should be viewed as a key metric for share price outperformance.

Screening Parameters:

Let’s pick stocks for which the last two quarter-over-quarter percentage EPS growth rates are more than 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 the 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 7,816 stocks to only nine. Here are the top five stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

PTC Therapeutics, Inc. (NASDAQ:PTCT) is a biopharmaceutical company. The company is focused on the discovery, development and commercialization of medicines using its expertise in ribonucleic acid (RNA) biology. This Zacks Rank #2 company is likely to yield a return of 23.8% this year, higher than the Medical - Drugs industry’s estimated gain of 6.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Catalyst Biosciences Inc (NASDAQ:CBIO) is a clinical-stage biopharmaceutical company focused on creating and developing medicines to address serious medical conditions. The company – with a Zacks Rank #1 – is likely to yield a return of 11.8% this year, better than the Medical - Biomedical and Genetics industry’s projected gain of 7.5%.

U.S. Silica Holdings Inc (NYSE:SLCA) is a domestic producer of commercial silica, a specialized mineral that is an input into a range of end markets. This Zacks Rank #2 company is likely to yield a return of 383.6% this year, more than the Mining - Miscellaneous industry’s estimated gain of 11.7%.

DXC Technology Company (NYSE:DXC) provides information technology services and solutions primarily in North America, Europe, Asia, and Australia. The company has a Zacks Rank #1 and is likely to yield a return of 10.4% this year, more than the Computers - IT Services industry’s projected gain of 10.2%.

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is an oilfield services company. The company – with a Zacks Rank #2 – is likely to yield a return of 47.8% this year, better than the Oil and Gas - Drilling industry’s estimated gain of 15.6%.

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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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