Constant earnings growth captivates almost everyone, right from the top brass to research analysts. This is because earnings are a measure of the money a company is making. Take a company’s revenues over a given period of time, subtract the cost of production and you will have its earnings!

Upbeat earnings results are more often than not followed by an uptick in the share price. Earnings acceleration, however, works even better when it comes to lifting the stock price. Studies have shown that a majority of successful stocks had seen acceleration in earnings before an uptick in the stock price.

Finding Future Outperformers

Basically, earnings acceleration is the incremental growth in earnings of a company. 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 referred to as 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.

This is the reason why earnings acceleration should be viewed as a key metric for share price outperformance.

The Winning Strategy

Let’s look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed 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.

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.)

The above criteria narrowed down the universe of around 7,735 stocks to only nine. Here are the top five stocks.

U.S. Silica Holdings Inc (SLCA - Free Report) is a domestic producer of commercial silica, a specialized mineral that is an input into a range of end markets. The company has a Zacks Rank #1.

The Zacks Consensus Estimate for its current year earnings soared 157.9% over the last 60 days. The company’s estimated earnings growth rate for this year is 341.2%, ahead of the Mining - Miscellaneous industry’s estimated addition of 13.6%.

DXC Technology Company (DXC - Free Report) provides IT services. The company’s services include Analytics, Application, Business Process, Cloud, Consulting, Enterprise and Cloud Applications, Security, Workplace and Mobility and Industries. DXC Technology sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for its current year earnings increased 1.1% over the last 90 days. The company’s estimated earnings growth rate for this year is 10.4%, ahead of the Computers - IT Services industry’s projected addition of 8.9%.

DST Systems, Inc. (DST - Free Report) is a provider of technology-based information processing and servicing solutions. The company sports a Zacks Rank #1.

The Zacks Consensus Estimate for its current year earnings advanced 4.9% over the last 60 days. The company’s estimated earnings growth rate for this year is 12.2%, ahead of the Computer - Software industry’s estimated increase of 10.1%.

Veeco Instruments Inc. (VECO - Free Report) is engaged in the design, development, manufacture and support of thin film process equipment, primarily sold to make electronic devices. The company carries a Zacks Rank #2.

The Zacks Consensus Estimate for its current year earnings rose 80% over the last 60 days. The company’s estimated earnings growth rate for this year is 152.7%, ahead of the Computer - Software industry’s projected addition of 29.6%.

RPC, Inc. (RES - Free Report) is a holding company for several oilfield services companies. The company has a Zacks Rank #2.

The Zacks Consensus Estimate for its current year earnings increased 5.3% over the last 60 days. The company’s estimated earnings growth rate for this year is 130.9%, ahead of the Oil and Gas - Field Services industry’s expected addition of 27.8%.