Earnings are a measure of how much money a company makes. As a result, earnings growth will continue to captivate nearly everyone in the investment world. However, earnings acceleration is more effective in raising stock prices.
According to studies, the most successful stocks have seen an increase in earnings prior to an increase in stock price. Constellation Energy Corporation (CEG), Carnival Corporation & plc (CCL), and Marathon Digital are three notable companies that have seen solid earnings growth recently (MARA).
Earnings acceleration, in fact, is the incremental growth in earnings per share of a company (EPS). In other words, earnings acceleration occurs when the rate of a company's quarter-over-quarter earnings growth accelerates within a specified time frame.
Earnings growth requires you to pay for something that is already reflected in the stock price. However, earnings acceleration can help identify stocks that haven't yet captured the attention of investors. Once secured, the share price will almost certainly rise. This is due to the fact that earnings acceleration takes into account both the direction and magnitude of growth rate.
An increasing percentage of earnings growth indicates that the company's fundamentals are sound and that it has been on the right track for some time. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, whereas a decelerating percentage of earnings growth may occasionally drag down prices.
Screening Parameters
Consider stocks whose last two quarter-over-quarter percentage EPS growth rates have exceeded the previous periods' growth rates. The projected quarterly percentage EPS growth rates are also expected to be higher than the growth rates in previous periods. Price currently greater than or equal to $5: This eliminates low-priced stocks.
A 20-day average volume greater than or equal to 50,000 indicates that the stocks have adequate liquidity.
The above criteria reduced the universe of approximately 7,735 stocks to only three. The stocks are as follows:
Constellation Energy generates and sells electricity in the United States. Zacks Rank #2 (Buy) CEG’s expected earnings growth rate for the current year is 938.8%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Carnival Corporation engages in the provision of leisure travel services. The company currently has a Zacks Rank #3 (Hold). CCL’s expected earnings growth rate for the current year is 95.3%.
Marathon Digital is a digital asset technology company that mines cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets. The company currently has a Zacks Rank #3. MARA’s expected earnings growth rate for the current year is 113.7%.
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