Apple and 2 More Stocks with Explosive Earnings Growth

Understanding Earnings Growth and Its Impact on Stock Performance

When analyzing a company's financial health, one of the most critical metrics to consider is its earnings. Earnings are calculated by taking a company’s total revenues over a specific period and subtracting the costs associated with producing goods or services. This figure is essential because it directly reflects a company’s profitability. Whether it's a startup or an established corporation, maintaining consistent earnings growth is vital for long-term survival and success.

Earnings not only determine a company's ability to sustain operations but also play a significant role in influencing stock prices. However, it's not just about the actual earnings; market expectations often have a more profound impact on stock performance. For example, a stock might decline even if earnings grow, or it could rally despite a drop in earnings, depending on whether the results meet or exceed investor expectations.

The Role of Earnings Estimates

Earnings estimates are projections made by analysts regarding a company’s future financial performance. These estimates take into account various factors such as sales growth, product demand, industry competition, profit margins, and cost control. They serve as a crucial tool for investors when making informed decisions about buying or selling stocks. Additionally, these estimates help analysts evaluate a company’s cash flow and determine its fair value.

Investors should pay close attention to stocks that show strong historical earnings growth and are experiencing upward revisions in their quarterly and annual earnings estimates. These indicators can signal potential opportunities for significant price movements.

Screening Measures Using Research Wizard

To identify stocks with strong earnings growth and positive estimate revisions, several parameters have been used in the screening process:

• Zacks Rank less than or equal to 3: This includes "Holds," "Buys," and "Strong Buys." The Zacks Rank is a reliable rating system that helps investors identify high-quality investment opportunities.
• 5-Year Historical EPS Growth (%) greater than X-Industry: This focuses on stocks with a history of strong earnings per share (EPS) growth compared to their industry peers.
• % Change EPS F(0)/F(-1) greater than or equal to 5: This identifies companies that have experienced year-over-year earnings growth of at least 5% in the last reported fiscal period.
• % Change Q1 Estimates over the last 4 weeks greater than zero: This looks for stocks whose current quarter earnings estimates have been revised higher in the past four weeks.
• % Change F1 Estimates over the last 1 week greater than zero: This targets stocks where annual earnings estimates have seen an upward revision in the past week.
• % Change F1 Estimates over the last 4 weeks greater than zero: This highlights stocks where annual earnings estimates have been increased in the past four weeks.

These criteria narrowed down a universe of approximately 7,839 stocks to just 20. Here are the top three stocks identified through this process:

Top Performing Stocks

Apple Inc. (AAPL)
Apple is a global leader in creating, producing, and selling smartphones, personal computers, tablets, wearable devices, and accessories. The company is expected to see an earnings growth rate of 8.2% for the current year. AAPL currently holds a Zacks Rank of #3 (Hold).

Microsoft Corporation (MSFT)
Microsoft provides software, services, devices, and solutions on a global scale. It is projected to achieve an earnings growth rate of 12.3% for the current year. MSFT has a Zacks Rank of #2 (Buy).

Mastercard Incorporated (MA)
Mastercard offers transaction processing and payment-related services both in the United States and internationally. The company is expected to see an earnings growth rate of 11.4% for the current year. MA currently has a Zacks Rank of #3.

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