Year-over-Year EPS, Revenue, and more… Can I build a formula?

First let’s just get a quick status update out of the way

Today went well. After dropping my weaker stocks (Blackberry and Tesla), I shot up 49.9 points (2.29%) by the end of the day (easily my strongest day yet). After hours trading has also continued to inch me upward. Pretty sure this is just the market’s reaction to polls indicating that Brexit will fail. Seems odd to me, though, since I’ve seen various polls that indicate the results as too close to call. I’m guessing the market will enter a small correction tomorrow as news of the Brexit failure (assuming it happens) cools. Alternatively, it’s still possible Brexit will pass and the market will freak out and plummet.

Anyway, moving on….

In addition to chart analysis, I’m starting to learn about the value of tracking year-over-year earnings per share (EPS), revenue, sales growth, and unusual events that could create artificial boosts or decreases around those measurements.

The general rules of thumb seem pretty straightforward:

  • Avoid any stock that doesn’t show EPS up at “least 18–20% in the most recent quarter versus the same quarter the year before.” How to Make Money in Stocks. Some investors won’t even go below 25% and others like to see both of the last two quarters meet this requirement.
  • Confirm that consensus earnings estimates project an upward trend.
  • Look for an accelerating rate of earnings growth across the previous 10 quarters.
  • Look for “sales growth of at least 25% for the latest quarter, or at least an acceleration in the rate of sales percentage improvement over the last three quarters.” This should always tag along with strong quarterly earnings. How to Make Money in Stocks.

Obviously there are way more rules. I haven’t even scratched the surface. Regardless, I decided to start drafting a series of conditions in Excel that automatically point me towards the buy/hold/sell stocks in my portfolio/watch list. Obviously this is it’s own, huge challenge. But it’s fun, so why not?

Right now, my spreadsheet (shown above) just calculates whether the year-over-year EPS and revenue are both greater than 40%. So…it doesn’t do much, and it doesn’t do it very well. I plan to incorporate additional values and measurements (including earning surprises, sales and sales growth, and whatever else I pickup on as I continue learning more about the stock market).

That’s all for now. I’ll keep you posted on my progress with the spreadsheet and everything else.