November has traditionally been one of the best months for stocks. This year, it won’t be any different. Interest rate cuts and a rise in consumer outlays may trounce short-term gyrations in the stock market due to the upcoming presidential election. Thus, investors should capitalize on the positive trend by investing in earnings acceleration stocks.

This is because studies have shown that most successful stocks have seen an acceleration in earnings before an uptick in the stock price. To that end, stocks like Snap Inc. SNAP, GeneDx Holdings Corp. WGS and Leonardo DRS, Inc. DRS are exhibiting solid earnings acceleration.

What is Earnings Acceleration?

Earnings acceleration is the incremental growth in a company’s earnings per share (EPS). In other words, if a company’s quarter-over-quarter earnings growth rate increases within a stipulated time frame, 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 spot stocks that haven’t yet caught the attention of investors and, once secured, will invariably lead to a rally in the 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.

Screening Parameters Using Research Wizard:

Look at stocks for which the last two quarter-over-quarter percentage EPS growth rates exceed the previous periods' growth rates. The projected quarter-over-quarter percentage EPS growth rates are also expected to be higher than the previous periods’ growth rates.

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).

Also, 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 six. Here are the best three stocks:

Snap

Snap is a mobile camera app for sharing short videos and images known as Snaps. Snap currently has a Zacks Rank #2 (Buy). SNAP’s expected earnings growth rate for the current year is 166.7%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

GeneDx

GeneDx is a pioneer in healthcare, using advanced exome and genome testing with rare disease data sets. GeneDx currently has a Zacks Rank #1. WGS’ expected earnings growth rate for the current year is 95.4%. 

Leonardo DRS

Leonardo DRS develops and manufactures defense products for the U.S. military and allies. Leonardo DRS currently has a Zacks Rank #2. DRS’ expected earnings growth rate for the current year is 21.9%. 

You can sign up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

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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