Following Q1 earnings reports, actual earnings per share were significantly above the estimated EPS prior to the calls. The earnings took investors and analysts by surprise, leading to drastic increases in earnings estimates in the last several weeks. The greatest beneficiaries have been the healthcare and information technology sectors, so we picked the best stocks in those sectors according to CressCap’s analysis.
Abiomed (ABMD-US) - Healthcare
Abiomed is a medical technology company that has worked since its founding in 1981 to be the company to create an artificial heart through research and development. The stock ranks number 2 out of 357 in the CressCap healthcare sector and falls in the 99th percentile of the CressCap universe, earning an overall grade of A+ according to our criteria. The value grade has gone down recently, largely due to a soaring price as the stock trends up, however, our fundamental analysis still has this stock as a buy because of its multifaceted strength. The short and long term-momentum grades for Abiomed are both graded A+, on a sector relative basis, even at a time when the healthcare sector is performing quite well. Following the company’s press releases from May 3rd, EPS has seen a small jump already and with an A grade on CressCap’s platform and a strong positive trend, we anticipate more increases are yet to come. For the current fiscal year, in the last 90 days, analysts have increased their estimates by 32% to $3.56. ABMD is also a winner for profitability, with CressCap grades of A- and A for ROE and ROI respectively, and a gross profit margin of 84.14 against a sector average of 55.77.
Inogen (INGN-US) - Healthcare
Another A+ graded stock, Inogen recently announced results that showed the positive trends in the company’s growth. Inogen is at the forefront of medical innovation, a leading producer of portable supplemental oxygen devices. When earnings were announced at the beginning of May, actual EPS were well above the analyst estimates at the time. For the current fiscal year, in the last 90 days, analysts have increased their estimates by 18.8% to $1.77. The two-year forward sales growth rate (%) CressCap grade is a B with growth at 54% vs. 23% for the sector. The mid- and long-term momentum grades are both A, with long-term momentum at a 108.19% increase relative to a sector increase of 22.19%. The company also saw a market cap 1-year change of 128%, while the sector experienced an average market cap change of 34% for the same period.
AbbVie (ABBV-US) - Healthcare
Blowing the estimates out of the water, AbbVie announced Q1 earnings on April 26th which included pleasantly surprising earnings reports, up to $7.74 from $6.58 in the past 90 days alone. In addition to being an A+ overall grade and ranking in the 97th percentile, the stock represents a great value. The overall value grade is an A, with a dividend yield of 3.85% - this in a sector that has an average dividend yield of 0%. Furthermore, the stock’s cash flow/ROI is 25.83 relative to a sector ratio of 1.29, earning the company an A+ grade. The future looks bright for the stock’s growth, with a 2 year forward EPS growth rate of 171% against a sector rate of .91%, earning an A grade from CressCap. Technical and fundamental opinions also have the stock as a buy recommendation.
GrubHub (GRUB-US) - Information Technology
Catching analysts lagging behind the real earnings that were announced on the first of the month, GrubHub’s Q1 earnings followed in the trend of IT and healthcare stocks with their above-expected results. The company is a leading national food-ordering technology that connects local take-out food restaurants with consumers, creating an easier delivery food experience. The company is seeing positive growth trends, with 2yr historic and 2yr forward sales growth rate grades of A and A+, respectively. The stock earns an A+ from CressCap in long-term price momentum increases.
TechTarget (TTGT-US) - Information Technology
TechTarget is a marketing and sales optimization service that is driven by big data and helps connect clients with potential customers who are already looking for a solution that their company offers. The stock is a perfect example of the strong EPS momentum we are referencing, as EPS estimate revisions bumped the EPS grade from a D to an A+ as they caught up with the recently reported EPS. In the last 90 days, current FY earnings have been revised to $0.71 from $0.54. The 2yr forward EPS growth rate is graded A by CressCap a projected 297.92% against a sector average projection of 36.74%. The stock also shows great momentum, with all A+ grades in the short, mid and long terms. The company ranks well for profitability, with an A- for gross profit margin, with a margin of 69.63 relative to a sector average margin of 48.29.
Blucora (BCOR-US) - Information Technology
Our final pick for top tech stocks with exceptional real EPS is Blucora. The company has a mission of making the tax landscape a little less complicated, both for businesses and individuals. Blucora also recently joined our buy list following a move in EPS revisions grade from a C to a B- trailing the company’s quarterly earnings report. In the past 90 days, the EPS revisions have increased by 25% for the current fiscal year to $1.88. The stock is performing well for growth and momentum, touting a one-year market cap change of 69.24%, sector average change was 25.2% for the same period. The two-year forward EPS growth rate of 270% relative to sector growth of 37%, earning the stock an A grade. Although the price has shot up recently, the stock still represents a good value with an EV/EBIT graded B+ by CressCap.
Written By: Steven Cress (steven.cress@cresscap.com) and Tela Wittig (tela.wittig@cresscap.com)
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