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4 Top Stocks Worth a Buy for Superb Earnings Growth

Analyze a company’s revenues over a given period, subtract the production cost, and you have earnings. Irrespective of whether it is a start-up or a well-known company, earnings growth is the main priority for any organization. This is because it won't last long if the company doesn’t make money.

By the way, this is also considered the most critical variable influencing share price. But expectations of earnings play a noteworthy role.

Earnings Estimates & Share Price Movements

Frequently, we have seen a decline in the stock price despite earnings growth and a rally in price following an earnings decline. This is essentially the result of a company’s earnings failing to meet market expectations.

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Earnings estimates embody analysts’ opinions on factors such as sales growth, product demand, competitive industry environment, profit margins and cost control. Thus, earnings estimates serve as a valuable tool, while making investment decisions.

Earnings estimates also help analysts assess the cash flow to determine the fair value of a firm.

Thus, investors should look for stocks ready to make a big move. Hence, investors need to buy stocks with historical earnings growth and are seeing a rise in quarterly and annual earnings estimates.

Screening Measures:

To shortlist stocks that have striking earnings growth and positive estimate revisions, we have added the following parameters:

Zacks Rank less than or equal to 2 (Only Zacks' 'Buys' and 'Strong Buys' are allowed. With the Zacks Rank proving itself to be one of the best rating systems out there, this is a great way to start things off.)

5-Year Historical EPS Growth (%) greater than X-Industry (stocks with a strong EPS growth history).

% Change EPS F(0)/F(-1) greater than or equal to 5 (companies that saw year-over-year earnings growth of 5% or more in the last reported fiscal).

% Change Q1 Estimates over the last 4 weeks greater than zero (stocks that have seen their current quarter earnings estimates revised higher in the last 4 weeks).

% Change F1 Estimates over the last 1 week greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 1 week).

% Change F1 Estimates over the last 4 weeks greater than zero (stocks that have seen their annual earnings estimates revised higher in the last 4 weeks).

The above criteria narrowed the universe of around 7,839 stocks to only nine. Here are the top four stocks that stand out:

BellRing Brands BRBR manufactures and sells nutrition products. The company has a Zacks Rank #1 (Strong Buy). BRBR’s expected earnings growth rate for the current year is 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paylocity Holding PCTY offers cloud-based payroll and human capital management software solutions. The company has a Zacks Rank #1. PCTY’s expected earnings growth rate for the current year is 22.3%.

Transdigm Group TDG is a leading global designer, producer, and supplier of highly engineered aerospace components. The company has a Zacks Rank #2 (Buy). TDG’s expected earnings growth rate for the current year is 25.7%.

NVIDIA NVDA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The company has a Zacks Rank #1. NVDA’s expected earnings growth rate for the current year is 87.4%.

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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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NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Transdigm Group Incorporated (TDG) : Free Stock Analysis Report

Paylocity Holding Corporation (PCTY) : Free Stock Analysis Report

BellRing Brands Inc. (BRBR) : Free Stock Analysis Report

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Zacks Investment Research