Duplicate

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."

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 uses the following criteria:

  • Mkt Cap £m > 25
  • EPS Surprise %, Last Interim > 5
  • EPS Surprise %, Last Interim > Median EPS Surprise %, Last Interim
  • 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


Can these rules be improved? Submit a suggestion »
Want to make your own version? Create a Duplicate

Performance Tracking


Returns FTSE 100
1 week 0.5% -2.3% -4.5% -2.1% -1.4% 0.1% -0.5% -0.7%
1 month -9.3% -6.3% -0.8% 6.1% 3.2% -1.2% -0.6% -0.7%
3 months -21.2% -17.1% -9.7% -18.5% -11.8% -10.9% -10.8% -7.4%
6 months -26.6% -21.4% 6.9% -23.3% -31.0% -18.8% 19.4% -10.0%
1 year -8.1% -3.4% 7.2% -24.3% -19.3% -19.5% 10.7% -5.1%
2 years 29.3% 10.2% 27.4% -28.6% -18.9% 9.8% -5.4% 3.3%
Annualised 12.6% 3.7% 19.1% -12.4% -1.0% 8.1% 9.6%
 
Risks
Max Drawdown -28.7% -35.5% -22.7% -47.6% -39.5% -28.1% -41.1%
Avg Holdings 17.8 23.8 25 3.9 0.6 17.8 3.2
Diversification Good Good Good Low Low Good Low