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Regardless of whether it is a start-up or a well-known company, earnings growth is the highest priority for any organization. This is because if the company doesn’t make money, it won’t last over the long run. So, what’s earnings growth? Study a company’s revenues over a given period of time, subtract the cost of production, and you have earnings. By the way, this is also considered the most important variable influencing the share price. But, expectations of earnings play a noteworthy role.

Earnings Estimates & Share Price Movements

Frequently, we have seen a decline in the stock price despite earnings growth and a rally in price following an earnings decline. This is largely the result of a company’s earnings failing to meet market expectations.

Earnings estimates embody analysts’ opinion on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool while making investment decisions. Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.

Investors, thus, should be on the lookout for stocks that are ready to make a big move. Hence, investors need to buy stocks with historical earnings growth and are seeing a rise in quarterly and annual earnings estimates.

Screening Measures:

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

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

% 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 around 7,839 stocks to only 22. Here are the top three stocks that stand out:

NVIDIA (NVDA) is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. NVIDIA’s GPU success can be attributed to its parallel processing capabilities supported by thousands of computing cores.

The company has a Zacks Rank #2 (Buy). NVDA’s expected earnings growth rate for the current quarter is 32.6%.

Arista Networks (ANET) provides cloud networking solutions for data centers and cloud computing environments. Arista Networks uses multiple silicon architectures across its products. At the core of the company’s cloud networking solutions is the Linux-based Extensible Operating System (EOS).

The company has a Zacks Rank #1. ANET’s expected earnings growth rate for the current year is 27.5%.

Franklin Electric Co. (FELE) is a global leader in the production and marketing of systems and components for the movement of water and automotive fuels. Franklin Electric has produced high-quality industrial pumps, filters and accessories.

The company has a Zacks Rank #1. ANET’s expected earnings growth rate for the current year is 17.3%.