The most important quality for a trader is identifying the stocks that matter, stocks that have the potential to rise. Online trading with a reliable broker dealer offering you a user-friendly platform can help you identify good opportunities.
Earnings Indicate the Health of a Company
The health of a company is judged by its earnings. The growth in earnings is probably the most convincing measure of how well a company is doing. Earnings are basically revenues made by the company in a given time period after deducting the cost of production. So when earnings rise, the shares price too rises.
However, that does not mean the earnings growth in the recent quarter is the only point you must consider. Rather, the earnings acceleration must be focused on since that has an even greater effect in lifting the price of the stock.
Why Earnings Acceleration is More Relevant
Earnings acceleration refers to the incremental growth of a company’s EPS (earnings per share). This quarter-over-quarter earnings should keep growing over a significant period for the company to be classified as having acceleration in earnings. If you are selecting stocks based on the earnings growth, the growth would already have been reflected in their price. Earnings acceleration can, however, also enable you to select stocks that have not yet witnessed much investor interest and, as a result, have not experienced a price rise. Earnings acceleration takes into consideration the magnitude of the growth rates along with their direction.
Increasing earnings growth percentage is often the fine line between a good and a great stock, providing the indication that the company has been on the growth trajectory for a period of time and is financially sound. However, sideways earnings growth percentage can indicate a consolidation or slowdown. A decelerating earnings growth percentage could bring down prices at times.
It can therefore be seen that investing in stocks with solid earnings acceleration is a profitable trading strategy. Online trading with the resources and trading platform offered by TradeZero can help you build experience and identify stocks that could make a difference. Call us at 954-944-3885!
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