In a year that is expected to be dominated by Donald Trump’s pro-growth plans, the Federal Reserve’s interest rate policies, and a strong U.S. economy, investors are looking for stocks that will capitalize on this bullish trend. One way to identify these stocks is to look for those with earnings acceleration.
What is Earnings Acceleration?
Earnings acceleration refers to the incremental growth in a company’s earnings per share (EPS). In other words, if a company’s quarter-over-quarter earnings growth rate increases within a stipulated time frame, it can be called earnings acceleration. This concept is important because it helps investors spot stocks that haven’t yet caught the attention of investors and will inevitably lead to a rally in the share price.
Why is Earnings Acceleration Important?
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. 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 drag prices down.
Top Stocks with Earnings Acceleration
After applying this criteria to the universe of around 7,735 stocks, we narrowed it down to four top stocks. Here are the results:
Genesco Inc. (GCO)
- Business Description: Genesco sells footwear, apparel and accessories as a retailer and wholesaler.
- Ranking: Currently has a Zacks Rank #1 (Strong Buy).
- Expected Earnings Growth Rate: 44.6% for the current year.
Lands’ End, Inc. (LE)
- Business Description: Lands’ End sells apparel, swimwear, outerwear, accessories, footwear, home products and uniforms digitally.
- Ranking: Currently has a Zacks Rank #1.
- Expected Earnings Growth Rate: 373.3% for the current year.
Mercury General Corp. (MCY)
- Business Description: Mercury General engages in writing personal automobile insurance in the United States.
- Ranking: Currently has a Zacks Rank #1.
- Expected Earnings Growth Rate: 1,583.3% for the current year.
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About the Author
Jim Giaquinto is a member of the Zacks team who brings his expertise in finance and investments to help investors make informed decisions. You can contact him at pr@zacks.com for more information on how to get started with the Research Wizard.
Disclaimer
The views expressed in this article are those of the author, Jim Giaquinto, and may not reflect those of Zacks Investment Research as a whole. Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security.
Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs.