Earnings and interest rates are often the two factors that determine stock prices over the long term. Investors have no control over the latter, but can focus on the company’s quarterly earnings results.
Both life and the stock market are about expectations, and while exceeding expectations is often rewarded, falling below them can have negative consequences. to try to get a bigger return.
Now that you know how important revenue and revenue surprises are, it’s time to show investors how to take advantage of these events to generate revenue with Zacks Earnings ESP Filters.
Zacks Earnings ESP Explained
Zacks Expected Surprise Prediction (ESP) works by locking in the latest analyst earnings revisions, as they may be more accurate than estimates weeks or months in advance of the actual release date. The idea is very simple. Analysts who provide earnings forecasts closer to the report may have more information.
The core of the ESP model is to compare the best estimate with the Sachs consensus estimate. In this case, the percentage difference between the two outcomes equals the expected surprise prediction. Zacks Rank will also be incorporated into the ESP metric, making it easier to spot companies that seem poised to beat the next final consensus estimate, which should hopefully help boost their stock prices.
Zacks rank 3 (hold) or higher positive earnings ESP together helped the stock report a positive earnings surprise 70% of the time. According to our backtest, investors are earning an average annual return of 28.3%.
Most stocks, about 60%, fall into the #3 (hold) category and are expected to perform in line with the broader market. Stocks rated #2 (buy) and #1 (strong buy), or in the top 15% and top 5% respectively, should outperform the market.
Should You Consider TSMC?
Now that you know what ESP is and how profitable it can be, let’s dive into the stocks that currently fit the bill. TSMC (TSM – free report) is currently in second place (buy), with the most accurate estimate at $1.81 per share, just 13 days after its next earnings release on January 12, 2023.
TSMC’s revenue ESP is +1.69%. This is calculated by taking the percentage difference between the most accurate estimate of $1.81 and the Zacks consensus estimate of $1.78, as explained above. TSM is also part of a large group of equities with positive ESP. Use the Earnings ESP Filter to find the best stocks to buy or sell before they’re reported.
TSM is one of the largest databases of computer and technology stocks with a positive ESP.Another strong stock is qualis (QLYS – free report) .
Qualys, which is expected to report earnings on February 9, 2023, holds the #1 (bullish buy) ranking in Zacks rankings, with the most accurate estimate 41 days after the next quarterly update of 0.91 per share. is a dollar.
For Qualys, the difference between the most accurate estimate and the $0.91 Zacks consensus estimate is +0.16%.
With both stocks holding positive earnings ESP, TSM and QLYS could outperform earnings in the next report.
Find stocks to buy or sell before they’re reported
Use the Zacks Earnings ESP filter to find stocks that are most likely to sell or sell unexpectedly before profitable close deals are reported. See here >>
