Techniques for Selecting Stocks with High Growth and Earnings Surprises

Previously, I wrote "Trading Strategies for Stocks with Significant Earnings Growth (Part 20)"—you can review the key points there. In recent weeks, market funds have clearly focused on stocks with substantial mid-year earnings surprises, particularly those exceeding expectations. For investors looking to uncover potential, stocks with mid-year earnings growth or surprises should be analyzed technically, focusing on those breaking out with high volume from the bottom or re-establishing an upward trend.

In addition to the key points mentioned in Part 20, investors can further refine their selection by targeting high-growth small-cap stocks, i.e., those with earnings surprises + high growth potential, which tend to perform even better. This article should be read in conjunction with Part 20 for a multi-layered filtering approach.

Here are a few additional screening criteria:

1. High-quality small- to mid-cap stocks (total shares < 500 million).

2. Mid-year EPS of ¥0.30 or higher (preferably ¥1.00+), with the industry in an upcycle (rising product prices, capacity expansion, or clear revenue growth).

3. Earnings growth of 50%+ (preferably those exceeding expectations, with 100%+ growth being ideal).

4. Forward P/E below 40x (or even under 30x).

5. Technical preference: Stocks that have corrected to attractive levels, broken out with volume from the bottom, or re-entered an upward trend.
   
   

In short: Small cap + strong earnings + low P/E + high growth + significant earnings surprise + technical breakout (or renewed uptrend)—such stocks offer greater opportunities.