Buy 5 Best Stocks With Accelerating Earnings

Investors are always on the lookout for stocks that are ready to make a significant jump. For that to happen, finding out stocks with consistent earnings growth is imperative. This is because earnings not only serve as the indicator of a company’s profitability but also influence the share price. Generally, better-than-expected earnings growth leads to an upsurge in the share price.

But, there is another metric called earnings acceleration, which works even better in boosting the share price. Studies have shown that the majority of successful stocks had seen acceleration in earnings before their positive price moves. So, what exactly is earnings acceleration?

Earnings Acceleration for Future Outperformers

Basically, earnings acceleration is the incrementally growing earnings per share (EPS) of a company. Or, in other words, it is the increase in a company’s quarter-over-quarter earnings growth within a stipulated frame of time.

But, why is it better than earnings growth? This is simply because in case of earnings you pay for something that has already been reflected in the stock price. However, in case of earnings acceleration you select stocks that haven’t caught the attention of the investors yet, which once secured will invariably lead to an uptick in the share price.

Increase in the percentage of earnings growth makes us believe that the company is in sound shape and has been on the right track for a consistent period of time. A sideways percentage of earnings growth, on the other hand, indicates a period of consolidation or slowdown. If the earnings growth percentage moderates, share prices are more likely to tank.

Hence, investment in stocks having solid earnings acceleration is a profitable strategy as it considers both the direction and magnitude of growth rates.

The Winning Strategy

Let’s look for stocks for which the last two quarter-over-quarter percentage EPS growth rates are more than 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.

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