StarMine Model Reveals Top Analyst Revisions Scores Favoring Growth
Despite what appears to be a nervous US stock market, companies earning the top 10% StarMine Analyst Revisions scores are showing higher market-weighted growth on average than the S&P 500.
We looked at stocks over $1 million in market value, and which trade over half a million shares daily on average. Those 1,000 companies became 97 after filtering for top Analyst Revision Model (ARM) scores. The ARM model is designed to predict future changes in analyst sentiment and incorporates more accurate earnings estimates, includes estimates on multiple fiscal periods, uses other financial measures in addition to earnings, and considers changes in analyst recommendations.
The average 5-year analyst EPS growth forecast for this portfolio of 13.8% beat both the S&P 500’s 8.1%, and the 12.1% forecast growth Thomson Reuters index of the “US Mid 2000” stocks (a smaller cap measure). Excluding Apple’s weight in the portfolio, the remaining stocks still mustered a 10.0% EPS growth rate.
Top stocks include such household names as Apple, (AAPL.O), Johnson & Johnson (JNJ.N), Procter & Gamble (PG.N) and CVS Caremark (CVS.N).
Those stocks also have another key characteristic of higher Earnings Quality. That’s StarMine’s ranking of future earnings sustainability. While the average score is 50 (on a 1-100 scale), the full portfolio scored 67 (a higher rank implies better earnings quality) when including Apple, and 69 excluding the heavy-weight.
It seems those high scores either consciously or unconsciously reveal that those companies may possess above-average growth forecasts on average, as well as higher earnings sustainability.
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