Beyond Earnings: The Difference Between Good Stocks and Great Stocks

With over 1,490 companies reporting earnings between this week and next, and over 480 companies reporting earnings the following week, here’s two screens to help you find the best ones.

With over 1,490 companies reporting earnings between this week and next, and over 480 companies reporting earnings the following week, here’s two screens to help you find the best ones.

In good markets or bad, strong earnings are one of the most important things that influence stock prices.

But instead of just looking at the most recent quarter’s earnings, try looking for a pattern of increasing earnings.

Sideways earnings ‘growth’ (even if they’re good) or decelerating earnings (strong or not) can potentially signal a period of consolidation (or slowdown) which in turn can flatten out prices or send them lower.

But steadily increasing earnings, with each period being better than the last, typically means the company is doing something right. And that can often be the difference between good stocks and great stocks.

The Parameters

In this screen, I’m looking for each of last 7 quarters of Earnings to be greater than the previous quarter’s Earnings. (And each one of these stocks reports within the next 2 weeks.)

The parameters are;

  • Quarterly EPS Q(0) > Quarterly EPS Q(-1)
  • Quarterly EPS Q(-1) > Quarterly EPS Q(-2)
  • Quarterly EPS Q(-2) > Quarterly EPS Q(-3)
  • Quarterly EPS Q(-3) > Quarterly EPS Q(-4)
  • Quarterly EPS Q(-4) > Quarterly EPS Q(-5)
  • Quarterly EPS Q(-5) > Quarterly EPS Q(-6)
  • Quarterly EPS Q(-6) > Quarterly EPS Q(-7)

The thing that makes this screen so tough (i.e., a great stock picker), is that it demands a consistency of excellent performance from a company over an ‘extended’ period of time.

This strategy will typically find stocks with fantastic earnings consistency and a history of beating earnings expectations.

There are 11 stocks in this week’s screen (2/5/07). They are;

Company

Ticker

Qtr
EPS
-7Q

Qtr
EPS
-6Q

Qtr
EPS
-5Q

Qtr
EPS
-4Q

Qtr
EPS
-3Q

Qtr
EPS
-2Q

Qtr
EPS
-1Q

Qtr
EPS
Recent (Q0)

Next EPS Report Date

BLDG-MAINTENANCE & SVC

Healthcare Serv

HCSG

$0.15

$0.15

$0.16

$0.17

$0.19

$0.20

$0.22

$0.23

2/13/07

FINANCE-CONSUMER LOANS

Asta Funding

ASFI

$0.43

$0.51

$0.59

$0.62

$0.64

$0.76

$0.80

$0.93

2/8/07

INSURANCE-LIFE

Torchmark Corp

TMK

$1.07

$1.12

$1.14

$1.16

$1.17

$1.20

$1.22

$1.26

2/7/07

MEDICAL/DENTAL-SUPPLIES

Chindex Intl

CHDX

-$0.69

-$0.38

-$0.21

-$0.11

-$0.07

$0.02

$0.08

$0.15

2/12/07

OIL FIELD MACH & EQUIP

Natl Oilwell Vr

NOV

$0.40

$0.42

$0.49

$0.53

$0.63

$0.74

$0.84

$1.00

2/6/07

OIL & GAS-FIELD SERVICES

Rpc Inc

RES

$0.10

$0.10

$0.12

$0.17

$0.19

$0.25

$0.28

$0.29

2/7/07

OIL & GAS-DRILLNG

Nabors Ind

NBR

$0.33

$0.40

$0.42

$0.59

$0.68

$0.79

$0.82

$1.03

2/6/07

Ensco Intl Inc

ESV

$0.26

$0.29

$0.40

$0.53

$0.67

$0.94

$1.27

$1.41

2/22/07

Patterson-Uti

PTEN

$0.20

$0.34

$0.43

$0.63

$0.80

$0.91

$1.00

$1.12

2/22/07

REIT-EQUITY TRUST

Alexandria Real

ARE

$1.18

$1.19

$1.20

$1.21

$1.22

$1.24

$1.26

$1.32

2/8/07

INTERNET CONTENT

Netease.Com-Adr

NTES

$0.11

$0.13

$0.21

$0.22

$0.24

$0.26

$0.28

$0.29

2/22/07

Most screeners won’t allow you to compare one period’s earnings to another period, let alone for the last 7 quarters (and more). But the Research Wizard will.

Sign up now for your 2 week free trial to the Research Wizard and take your stock screening to another level. And then when you’re done, backtest it to see how it works! And don’t forget to check out the winning trading strategies that come loaded with the program. Know when to buy and when sell. It’s all there. You can do it.
http://researchwiz.zacks.com

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.

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