Investing in the stock market can be a daunting task, especially for those who are new to the game. With so many options available, it can be difficult to know where to start. However, one key factor that can help investors make informed decisions is earnings quality. A company’s ability to consistently generate strong earnings is a key indicator of its financial health and future growth potential.
So, how can investors identify stocks with improved earnings quality? One way is to look for companies that have improved their earnings quality score by more than 50% year-on-year. This is exactly what our team did, screening companies with a minimum earnings quality score of over 50 in 2023-24. The result is a list of five stocks that not only have improved their earnings quality but also have a double-digit share price potential.
But what exactly is earnings quality? Simply put, it is a measure of a company’s ability to generate earnings that are sustainable and of high quality. This can be influenced by a range of factors, including revenue growth, profit margins, and cash flow generation. By analyzing these factors, investors can get a better understanding of a company’s financial health and make more informed investment decisions.
While the exact algorithm used to calculate earnings quality is not publicly available, the results are clear: these five stocks have made significant improvements in their earnings quality over the past year. And with a decent number of analysts covering each stock, investors can be confident that they are making an informed decision.
So, without further ado, here are the five stocks that made the cut. From a range of sectors and industries, these stocks offer investors a unique opportunity to benefit from improved earnings quality and double-digit share price potential.