After grappling with recession fears, the Federal Reserve’s jumbo interest rate cuts helped the broader S&P 500 to defy the odds of a notorious September and notch record highs. The S&P 500 posted its best three-quarters of the 21st century, and if history is any guide, the index is well-poised to continue its winning streak over the next three months.
The 30-stock Dow and the tech-laden Nasdaq also closed in the green in the first nine months of 2024. Thus, it’s judicious for astute investors to place their bets on stocks such as Argenx SE ARGX, Alphatec Holdings, Inc. ATEC and Olin Corporation OLN that can take advantage of the broader market uptrend. This is because these stocks exhibit strong earnings acceleration, often signaling an increase in the stock price.
What is Earnings Acceleration?
Earnings acceleration is the incremental growth in a company’s earnings per share (EPS). In other words, if a company’s quarter-over-quarter earnings growth rate increases within a stipulated time frame, it can be called earnings acceleration.
In the case of earnings growth, you pay for something that is already reflected in the stock price. However, earnings acceleration helps spot stocks that haven’t yet caught the attention of investors and, once secured, will invariably lead to a rally in the share price. This is because earnings acceleration considers both the direction and magnitude of growth rates.
An increasing percentage of earnings growth means that the company is fundamentally sound and has been on the right track for a considerable period. Meanwhile, a sideways percentage of earnings growth indicates a period of consolidation or slowdown, while a decelerating percentage of earnings growth may drag prices down.
Screening Parameters Using Research Wizard:
Look at stocks for which the last two quarter-over-quarter percentage earnings per share (EPS) growth rates exceed the previous periods’ growth rates. The projected EPS growth rates for the upcoming quarter are expected to exceed those of prior periods.
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 low-priced stocks.
Average 20-day volume greater than or equal to 50,000: High trading volume implies that the stocks have adequate liquidity.
The above criteria narrowed the universe of around 7,735 stocks to only three. Here are the stocks:
Argenx
Argenx is a biopharmaceutical company specializing in antibody therapies for autoimmune diseases and cancer treatments. Argenx currently has a Zacks Rank #1 (Strong Buy). ARGX’s expected earnings growth rate for the current year is 92.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Alphatec Holdings
Alphatec Holdings is dedicated to creating, and marketing spine disorder surgical treatment products. Alphatec Holdings currently has a Zacks Rank #2 (Buy). ATEC’s expected earnings growth rate for the current year is 29.9%.
Olin Corporation
Olin Corporation is a global producer and distributor of chemical products and a U.S. ammunition maker, with operations in Latin America, Asia Pacific and Europe. Olin Corporation currently has a Zacks Rank #2. OLN’s expected earnings growth rate for the next five years is 28.6%.
You can sign up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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