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Earnings Surprise Screen 27 Qualifying in UK

When companies report earnings significantly higher than analyst's earnings estimates the result is known as an 'earning's suprise'.  While earnings surprises often create spikes in the share price on the day of the announcement, they have also been observed to trigger longer term increases in the share price.  This effect is known as the  "Post Earnings Announcement Drift" and can last for several weeks or even months after the announcement date.  The effect is generally attributed to the fact that analysts are slow to revise their forecasts and the market does not fully react to the information about future growth conveyed by the earnings surprises.  The idea behind the strategy is to buy stocks that report earnings surprises and hold them over this time period. Positive surprises often happen at the beginning of a turnaround, or a new growth cycle where sales start to accelerate beyond the historical rates, “surprising” the analyst community.  You can read more here. To learn more about this strategy please click here »

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 is based on a UK dataset. It 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 -1.7% -0.0% 3.8% 1.3%
1 month -6.1% -1.7% -2.4% -2.4%
3 months -15.0% -11.4% 3.6% -4.0%
6 months -17.1% -19.7% - -3.4%
1 year -16.2% -16.8% - 0.8%
2 years 18.3% - - 10.3%
Annualised 5.9% -8.3% 23.1%
 
Risks
Max Drawdown -21.9% -27.2% -11.1%
Avg Holdings 19.6 24.6 25
Diversification Good Good Good

 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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27 Qualifying in

Ticker Name Mkt Cap £m Sales £m EPS Surprise %, Last Interim Sales Surprise %, Last Interim EPS Surprise % Last Yr
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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.