Earnings: The Indispensable Element Of Great Stocks
Acceleration Is Also Important
Many stocks that make major advances have another trait.
Their earnings accelerate over the previous three or
four quarters. Acceleration represents an increase in
the earnings growth rate quarter over quarter.
Shares of Cree Inc., the maker of semiconductor devices,
were at $20 in May 1999 when it began an ascent that
took it past $100 by early 2000. Before this jump began,
its quarterly earnings grew 67%, 71% and 86%.
Improving bottom-line growth, such as Cree's, nearly
always precedes a burst in stock price. What's important
to realize about this is that it's not just rising earnings
that make a good stock. The key is to focus on companies
whose earnings may be drawing professional investors'
attention -- the phase when a stock prepares to spring
higher.
investors.com
|