In the midst of a bullish market trend, supported by Donald Trump’s pro-growth plans and the Federal Reserve’s interest rate policies, investors are looking for stocks that will capitalize on this momentum. One way to identify these opportunities is through earnings acceleration – a key indicator of a company’s financial health and potential for growth.
What is Earnings Acceleration?
Earnings acceleration refers to the incremental growth in a company’s earnings per share (EPS). In simpler terms, it measures the rate at which a company’s profits are increasing over time. If a company’s quarter-over-quarter earnings growth rate increases within a stipulated timeframe, it can be called earnings acceleration.
Why is Earnings Acceleration Important?
While paying for something that has already been reflected in the stock price can lead to a decrease in value, earnings acceleration helps identify stocks that haven’t yet caught the attention of investors. Once secured, these stocks are likely to lead to a rally in share prices. This is because earnings acceleration considers both the direction and magnitude of growth rates.
Increasing Percentage of Earnings Growth
An increasing percentage of earnings growth indicates 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 may indicate a period of consolidation or slowdown, while a decelerating percentage of earnings growth may drag prices down.
Top 3 Stocks with Earnings Acceleration
After narrowing the universe of around 7,735 stocks to only four based on the above criteria, we identified the top three stocks that exhibit strong earnings acceleration. These companies are:
Genesco Inc. (GCO)
Genesco sells footwear, apparel, and accessories as a retailer and wholesaler. With a Zacks Rank #1 (Strong Buy), GCO’s expected earnings growth rate for the current year is 44.6%. This means that investors can expect a significant increase in profits from this company.
Lands’ End, Inc. (LE)
Lands’ End sells apparel, swimwear, outerwear, accessories, footwear, home products, and uniforms digitally. With a Zacks Rank #1, LE’s expected earnings growth rate for the current year is 373.3%. This represents an impressive increase in profits, making it an attractive investment opportunity.
Mercury General Corp. (MCY)
Mercury General engages in writing personal automobile insurance in the United States. With a Zacks Rank #1, MCY’s expected earnings growth rate for the current year is 1,583.3%. This is an astonishing increase in profits, making it an excellent choice for investors.
Investing in These Stocks
While these stocks have shown impressive earnings acceleration, it’s essential to remember that past performance is no guarantee of future results. Before investing, research and evaluate the company’s financial health, industry trends, and market conditions. Consult with a financial advisor or conduct your own research to make an informed decision.
Conclusion
Earnings acceleration is a crucial metric for identifying companies with potential for growth. By focusing on stocks that have demonstrated increasing profits over time, investors can capitalize on these opportunities and potentially reap significant returns. The top three stocks mentioned above – Genesco Inc., Lands’ End, Inc., and Mercury General Corp. – offer an attractive combination of financial health and market momentum.
Key Takeaways
- Earnings acceleration is a key indicator of a company’s financial health and potential for growth.
- An increasing percentage of earnings growth indicates that the company is fundamentally sound and has been on the right track for a considerable period.
- The top three stocks with earnings acceleration – Genesco Inc., Lands’ End, Inc., and Mercury General Corp. – have demonstrated impressive increases in profits.
Disclaimer
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. Consult with a financial advisor or conduct your own research before making an informed decision.
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