Top 3 Stocks With Accelerating Earnings Growth to Watch in 2025
Top 3 Stocks: The year 2025 is shaping up to be a promising one for the stock market, driven by a robust U.S. economy, pro-growth policies under Donald Trump’s leadership, and favorable interest rate strategies by the Federal Reserve. Investors seeking to capitalize on these bullish trends should focus on stocks demonstrating strong earnings acceleration, a critical indicator of potential price surges in the future.
Historically, stocks with accelerating earnings have outperformed their peers, often catching investors’ attention and leading to significant price appreciation. In this guide, we explore the concept of earnings acceleration, why it matters, and the top three stocks that show promising signs of growth: Genesco Inc. (GCO), Lands’ End, Inc. (LE), and Mercury General Corporation (MCY).
Understanding Earnings Acceleration
Earnings acceleration refers to an increase in the growth rate of a company’s earnings per share (EPS) over a specific period. This incremental improvement in earnings growth often signals strong business fundamentals and suggests the company is on a sustained upward trajectory.
For example:
Positive Earnings Acceleration: A company’s quarter-over-quarter EPS growth rate rises consistently.
Sideways Growth: The growth rate stagnates, indicating a period of consolidation.
Decelerating Earnings: A declining growth rate may signal weakening fundamentals, often leading to stock price declines.
Focusing on stocks with positive earnings acceleration can help investors identify undervalued opportunities before they gain broader market attention.
Why Earnings Acceleration Matters
- Spotting Early Opportunities: Stocks with accelerating earnings are often undervalued since their improved fundamentals may not yet be reflected in their current prices.
- Direction and Magnitude: Earnings acceleration accounts for both the direction (positive or negative) and the magnitude of growth, providing a more comprehensive picture of a company’s financial health.
- Catalyst for Price Surges: As earnings improve, investor confidence grows, leading to increased demand and higher stock prices.
Investors who identify these trends early can benefit from significant price appreciation before the broader market catches on.
Screening for the Best Stocks
To identify stocks with strong earnings acceleration, we applied the following criteria using the Zacks Research Wizard:
- Quarterly EPS Growth: The last two quarters’ EPS growth rates must exceed those of prior periods.
- Projected EPS Growth: The projected growth rate for the upcoming quarter must also surpass historical growth rates.
- Liquidity and Price:
Current stock price ≥ $5 to filter out low-priced stocks.
Average 20-day trading volume ≥ 50,000 shares to ensure adequate liquidity.
These filters narrowed the universe of over 7,700 stocks to just a handful, with Genesco, Lands’ End, and Mercury General emerging as the top picks. Let’s explore why these stocks stand out.
Top 3 Stocks With Earnings Acceleration in 2025
- Genesco Inc. (Ticker: GCO)
Industry: Retail – Footwear, Apparel, and Accessories
Zacks Rank: #1 (Strong Buy)
Earnings Growth Rate: 44.6% for the current year
Genesco operates as a retailer and wholesaler of footwear, apparel, and accessories, serving both domestic and international markets. The company has demonstrated consistent earnings growth, driven by strong consumer demand and effective cost management strategies.
Key Drivers:
Expansion in e-commerce and omnichannel retailing.
Growing demand for lifestyle and athletic footwear.
Strategic partnerships with leading global brands.
With its robust earnings trajectory and a favorable macroeconomic environment, Genesco remains a top choice for investors seeking exposure to the retail sector.
- Lands’ End, Inc. (Ticker: LE)
Industry: Retail – Apparel, Footwear, and Home Products
Zacks Rank: #1 (Strong Buy)
Earnings Growth Rate: 373.3% for the current year
Lands’ End specializes in high-quality apparel, swimwear, outerwear, and home products, primarily sold through digital platforms. The company’s ability to connect with consumers via its direct-to-consumer model has fueled its impressive earnings acceleration.
Key Drivers:
A surge in online sales due to shifting consumer preferences.
Enhanced supply chain efficiency and inventory management.
Strategic focus on sustainability and customer-centric product design.
The company’s remarkable earnings growth rate underscores its strong positioning in the competitive retail landscape.
- Mercury General Corporation (Ticker: MCY)
Industry: Insurance – Personal Automobile
Zacks Rank: #1 (Strong Buy)
Earnings Growth Rate: 1,583.3% for the current year
Mercury General is a leading provider of personal automobile insurance in the United States, with a focus on offering competitive rates and superior customer service. The company’s earnings acceleration is a testament to its effective risk management and market adaptability.
Key Drivers:
Increased premiums and higher customer retention rates.
Improved underwriting processes leading to reduced claims expenses.
Expansion into new markets and product lines.
As the insurance sector benefits from rising demand and favorable economic conditions, Mercury General stands out as a compelling investment opportunity.
The Road Ahead for Investors
Investors looking to maximize returns in 2025 should consider stocks with strong earnings acceleration. By identifying companies with improving fundamentals and growth trajectories, you can capitalize on untapped opportunities before they become widely recognized.
Key Takeaways:
Earnings acceleration provides a more nuanced view of a company’s financial health.
Stocks like Genesco, Lands’ End, and Mercury General exhibit strong potential for price appreciation in the coming year.
Use screening tools like the Zacks Research Wizard to refine your stock selection process and uncover hidden gems.
A Final Note on Research and Strategy
While the stocks highlighted above show immense potential, it’s essential to conduct your due diligence and diversify your portfolio. Consider signing up for the Zacks Research Wizard for advanced screening tools and personalized investment strategies to stay ahead in 2025.
Disclaimer:
This article is for informational purposes only and should not be construed as investment advice. Always consult a financial advisor before making investment decisions.
By focusing on earnings acceleration and utilizing the right research tools, you can position yourself for success in 2025 and beyond.
Frequently Asked Questions (FAQ)
- What is earnings acceleration ?
Earnings acceleration refers to the incremental increase in a company’s earnings per share (EPS) growth rate over time. It highlights improvements in financial performance, suggesting the company is on a stronger growth trajectory.
- Why is earnings acceleration important for investors ?
Earnings acceleration helps investors spot undervalued stocks before they catch the market’s attention. It also provides insights into a company’s fundamental health, offering a better gauge of long-term growth potential compared to static earnings growth.
- How do I identify stocks with earnings acceleration ?
To identify such stocks:
Look for consistent increases in quarter-over-quarter EPS growth rates.
Analyze projected EPS growth for future quarters.
Use screening tools, such as the Zacks Research Wizard, to refine your stock search based on specific criteria like liquidity and price.
- What sectors benefit most from earnings acceleration ?
Earnings acceleration can occur in any sector, but it is particularly common in industries experiencing innovation, strong demand, or economic tailwinds. Examples include retail, technology, healthcare, and financial services.
- Why were Genesco, Lands’ End, and Mercury General chosen as top stocks ?
These stocks were selected based on their strong earnings acceleration, high Zacks Rank (#1 – Strong Buy), and robust growth rates for the current year:
Genesco: 44.6% growth rate due to retail expansion.
Lands’ End: 373.3% growth rate fueled by digital sales.
Mercury General: 1,583.3% growth rate from improved insurance underwriting.
- Is earnings acceleration better than earnings growth ?
Yes, earnings acceleration provides a more dynamic view as it considers the rate at which earnings are growing, rather than just the growth itself. It indicates whether a company’s performance is improving or slowing over time.
- What tools can I use to find stocks with earnings acceleration ?
Screening tools like the Zacks Research Wizard allow you to filter stocks based on criteria such as EPS growth, projected earnings, liquidity, and price. These tools help streamline the search process and uncover high-potential opportunities.
- Are there risks involved in investing in stocks with earnings acceleration ?
Like all investments, there are risks, including:
The company failing to sustain its earnings growth.
Market conditions adversely affecting stock performance.
Over-reliance on past performance without considering broader economic factors.
Diversifying your portfolio and conducting thorough research can mitigate these risks.
- How can I stay updated on stocks with accelerating earnings ?
Sign up for investment platforms like Zacks Research to receive regular updates and recommendations. Monitor earnings reports, analyst forecasts, and market news to stay informed.
- Is this strategy suitable for all investors ?
This strategy is ideal for growth-oriented investors with a medium-to-high risk tolerance. Conservative investors may prefer stocks with stable earnings rather than those relying on rapid acceleration. Always align your investment choices with your financial goals and risk appetite.