Savvy investors often focus on companies demonstrating steady earnings growth as a marker of solid profitability. However, an even more powerful signal is earnings acceleration, which often serves as a stronger catalyst for stock price gains. Research shows that many top-performing stocks tend to display earnings acceleration before their share prices begin to move higher.
To that end, Mirion Technologies, Inc. MIR, Intuit Inc. INTU and ANI Pharmaceuticals, Inc. ANIP are showing strong earnings acceleration.
Earnings Acceleration Decoded
Earnings acceleration refers to the incremental growth in a company’s earnings per share (EPS). Put simply, if a company’s quarter-over-quarter earnings growth rate increases over a given period, 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 identify stocks that haven’t yet caught investors’ attention and, once secured, will invariably lead to a rally in 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.
Research Wizard Screening: How to Find Winning Stocks Fast
Look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the previous periods’ growth rates. The projected EPS growth rate for the upcoming quarter is expected to exceed that 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 four. Here are the top three stocks:
Mirion Technologies
Mirion Technologies delivers radiation detection, measurement and monitoring solutions across North America, Europe and the Asia-Pacific region. MIR’s expected earnings growth rate for the current year is 19.6%. Currently, the company has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuit
Intuit offers financial management, payments, capital, compliance, and marketing services in the United States. INTU’s expected earnings growth rate for the current year is 14.9%. The company currently has a Zacks Rank #2.
ANI Pharmaceuticals
ANI Pharmaceuticals is a biopharmaceutical company that develops, manufactures, and markets branded and generic drugs in the United States and globally. ANIP’s expected earnings growth rate for the current year is 14.3%. Currently, the company has a Zacks Rank #2.
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This article originally published on Zacks Investment Research (zacks.com).