Filtering based on Earnings Estimates

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Filtering based on Earnings Estimates
Ahead of earnings season, there is a basic earnings estimates screen I like to track that tries to find stocks with the following characteristics:

+30% Increase in Next Quarter’s EPS Estimate From Same Quarter Prior Year Actual EPS

+30% Increase in Current Annual EPS Estimate vs. Last Reported Annual EPS

+30% Increase in Next Year’s Annual EPS Estimate vs. Current Annual EPS Estimate

Current Price Greater than Or Equal To $5 per share

Relative Strength Rating Of 80 Or Higher

Current 50-Day Average Volume Is +250,000 Or More

When I ran this screen through IBD’s custom screen wizard this morning, 25 stocks showed up. Here they are ranked from the highest RS to the lowest: REV, SMOD, NOG, ARUN, MELI, KONG, GMCR, BCSI, WSM, NM, GFA, IAG, CRM, AGO, CRUS, VIV, CML, GOLD & EVVV.

While you can certainly use a screen of this nature to find trading and investment opportunities, there’s another reason I like to track it as we enter another earnings season.
- With such high earnings estimates and expectations, this select group of stocks “should” outperform as earnings are reported and as the numbers beat the high expectations.
- However, if they underperform significantly (sell off after their reports) and/or miss their targets it offers a clue that good news that analysts expect have already been “baked into” the stock prices and that’s not good.

Basically, I like to use this screen sort of as like a barometer on what to expect from the earnings season as a whole and monitor it carefully to see the reaction to how these companies perform after earnings are reported AND whether earnings estimates are raised even further after the report which is key to identifying long-term winners.

As you probably know, the price of a stock tends to trend in the direction of the analyst earnings estimates and you want to see those estimates raised even further after the companies report their earnings. Which is why targeting companies with the highest expectations and relative strength is usually helpful as tool
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- other good additional resource is : Use BeSpoke hisotrical gapup/downs on earning release days ..