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Earnings Surprise Screen 30 Qualifying

Earnings Surprise Momentum is a momentum investing strategy that was identified in research by academics Narasimhan Jegadeesh and Joshua Livnat in their paper, Revenue Surprises and Stock Returns. It specifically looks for companies that managed to significantly beat earnings and sales forecasts in their previous financial results. These 'earnings surprises' have been found to cause medium term increases in share prices. This is believed to be caused by analysts being slow to revise their forecasts and the market failing to adequately 'price-in' the better than expected results. Jegadeesh and Livnat found that the the top 20% of stocks in terms of upside earnings and sales surprises outperformed the market by 5.3%. They wrote: "Although analysts revise their forecasts of future earnings in response to revenue surprises, they are slow to incorporate fully the information in revenue surprises."

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This is an independent study based upon the methods of...
Picture of Narasimhan Jegadeesh

Narasimhan Jegadeesh

Chair in Finance at the Goizueta Business School. Published extensively in the Journal of Finance.

Revenue Surprises and Stock Returns

by Jegadeesh and Livnat

Jegadeesh and Livnat were published in 2006 in the Financial Analysts Journal.  They found that the top 20% of stocks that beat analysts estimates outperformed over the next 6 months by 3%.  The research paper is linked to above. 

This screen uses the following criteria:

  • Mkt Cap £m > 25
  • EPS Surprise %, Last Interim > 5
  • EPS Surprise %, Last Interim > Median
  • EPS Surprise % Last Yr > 5
  • Sales Surprise %, Last Interim > 5
  • Sales £m > 25
  • Rank ( Mkt Cap £m ) < 75%

Results are sorted by:

  • EPS Surprise %, Last Interim in descending order


And limited to the first 30 Results


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Performance Tracking


Returns FTSE 100
1 week 2.6% 2.9% -1.8% -2.1% -0.4% -3.5% 0.9% -0.4%
1 month -0.7% 7.4% 4.8% -7.8% -1.3% -5.4% 17.1% 2.1%
3 months -10.5% 1.2% 27.2% -6.6% -6.4% 10.8% 25.3% 11.9%
6 months -0.2% 12.0% 26.2% - - - - 15.2%
1 year 5.6% 10.4% 28.7% - - - - 11.0%
2 years -2.1% -10.7% 37.1% - - - - 1.4%
Annualised 7.8% -2.4% 18.5% -15.7% -15.3% 33.0% 105.8%
 
Risks
Max Drawdown -28.5% -35.5% -22.7% -11.9% -11.4% -7.6% -11.7%
Avg Holdings 20 23.3 25 1.1 0.4 17.3 5.1
Diversification Good Good Good Low Low Good Low

 Studies based on equal weighted portfolios of max 25 stocks rebalanced quarterly. Qualifying shares below updated daily. Past performance not indicative of future returns.



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30 Qualifying

Ticker Name Mkt Cap £m Sales £m EPS Surprise %, Last Interim Sales Surprise %, Last Interim EPS Surprise % Last Yr Flag
Subscriber Subscriber India
Subscriber Subscriber France
Subscriber Subscriber India
Subscriber Subscriber United States
Subscriber Subscriber United Kingdom
Subscriber Subscriber United States
Subscriber Subscriber United States
Subscriber Subscriber Canada
Subscriber Subscriber United States
Subscriber Subscriber United States
Subscriber Subscriber New Zealand
Subscriber Subscriber India
Subscriber Subscriber Poland
Subscriber Subscriber Australia
Subscriber Subscriber Norway
Subscriber Subscriber Canada
Subscriber Subscriber Turkey
Subscriber Subscriber United States
Subscriber Subscriber Poland
Subscriber Subscriber Belgium
Subscriber Subscriber Sweden
Subscriber Subscriber United States
Subscriber Subscriber Singapore
Subscriber Subscriber Sweden
Subscriber Subscriber Australia
Subscriber Subscriber United States
Subscriber Subscriber United States
Subscriber Subscriber Sweden
Subscriber Subscriber United States
Subscriber Subscriber United States

Can't see the share you expect? View this screen as a checklist to find out why.

You should consider the results of any screening process, including this one, as candidates for further research, not as a buy list. Screening helps to narrow a search based on pre-defined criteria. It is not a substitute for independent research reflecting your individual criteria for investing/trading. Please note that the screening criteria used represents Stockopedia's interpretation of the author's investment approach and are not determined or endorsed by the original strategist.



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