Buy These 5 Stocks With Explosive Earnings Growth

From CEOs to research analysts, everyone is fascinated with a metric called earnings. But, what exactly do earnings represent and why do they draw so much attention? This is simply because earnings indicate how much money a company makes. Take a company’s revenue over a given period of time, subtract the cost of production and, there it is, you have earnings!

This metric significantly influences a company’s share price. Upbeat earnings results generally lead to an uptick in the share price. However, in addition to actual earnings, expectations of earnings also play a significant role in influencing the share price.

Earnings Estimates and Their Impact on Stock Prices

On numerous occasions we have seen a company’s shares falling in spite of generating earnings growth. This happens because of missing estimates. Here, earnings estimate revisions come into play. These are analysts’ expectation of the future earnings power of the firm that helps in determining the stock price movement. But what exactly do earnings estimates represent?

Earnings estimates embody analysts’ opinions of factors such as sales growth, product demand, competitive industry environment, profit margins, expenses and cost control. So, while zeroing down to buy stocks with solid earnings growth, it is also important to figure out whether its earnings estimates are on the rise or not.

We have selected stocks that not only possess historical earnings growth but are also seeing an increase in quarterly and annual earnings estimates.

The Winning Strategy

In order to shortlist stocks that have striking earnings growth and positive estimate revisions, we added 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 that possess strong EPS growth history.

% Change EPS F(0)/F(-1) greater than or equal to 5: Companies that witnessed year-over-year earnings growth rate of 5% or more in the last reported fiscal year.

% 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 down the universe of over 7,747 stocks to only 7. Here are the top 5 stocks:

Dycom Industries Inc. (DY)

Casey's General Stores, Inc. (CASY)

Copart, Inc. (CPRT)

Boston Scientific Corporation (NYSE:BSX) (BSX)

Euronet Worldwide, Inc. (EEFT)

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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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