ServiceNow & 2 Other Stocks to Buy for Earnings Growth

In This Article:

Study a company’s revenues over a period and deduct production costs to find earnings, which is crucial for any organization’s survival. Irrespective of whether it is a start-up or a well-known company, earnings growth is the top priority for any organization. This is because if the company doesn’t make money, it won’t survive.

Earnings are also considered the most important variable influencing share price. However, expectations of earnings play a prominent role.

Nonetheless, stocks such as ServiceNow, Inc. NOW, Lululemon Athletica Inc. LULU and Amphenol Corporation APH are currently exhibiting superb earnings growth.

Earnings Estimates & Share Price Movements

Frequently, we have seen the stock price decline 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’ opinions 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.

Thus, investors should watch for stocks poised 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.

We use that basis to determine our stock selections using Zack’s Research Wizard Tool.

Screening Measures Using Research Wizard:

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).