No one knows a company better than those who run it. Sure, they'll miss their own estimates plenty of times, but they nonetheless have more insight into how their companies will behave in the future. We'll periodically check whether insiders are buying stocks, or whether companies are buying back their own shares. These can both be bullish signs for a company.
Now, we want to look for companies that raise their earnings guidance for the coming quarter or year. Over time, earnings growth follows sales growth. When a company predicts greater profits, we expect its stock price to soon follow.
Once we've found these candidates, we'll turn to Motley Fool CAPS to pinpoint the most promising stocks among them. CAPS asks professional and novice investors alike to rank the thousands of stocks in the universe, overweighting the most successful and accurate players' opinions. From that data, CAPS rates each company from one star (the worst) to five (the best). In all, CAPS harnesses the brainpower of more than 25,000 analysts to discover whether these companies will flop or fly.
This week's contenders
Things are looking bleak this time. Of all of the companies issuing guidance last week, only two dared to top their previously issued forecasts.
Real estate investment trust Equity Inns (NYSE: ENN ) said that funds from operations -- a widely used measure of REIT performance -- are expected to come in at $0.36 to $0.37 per share. That's about 12% better than the $0.31 to $0.33 per share it previously predicted, and better than the $0.32 per share analysts had forecast.
Chinese advertising firm Focus Media (Nasdaq: FMCN ) also raised guidance for its American depository shares by $0.02, to as much as $2.92 per share, citing the completion of its acquisition of Allyes Information Technology.
Meanwhile, quite a few companies provided guidance that matched previously issued forecasts, including Stride Rite (NYSE: SRR ) . Maybe the economy isn't faltering -- maybe it's just going to be "in line." In our Stocks Lowering Guidance article, we'll continue to look at companies that think the next quarter or year won't be nearly as rosy as they once hoped.
Raising their voices
So what do CAPS players think about Equity Inns?
- "What's not to love?" asks 2099ep. "Great REIT with a nice yield. It is linked to nice hotel brands-can only continue to increase the number of hotels and strengthen the links with the top end names."
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tonetown says that Equity Inns has "prudent management with well known names."
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Netscribes, a business research and analyst firm, notes: "Equity Inn's 95% of portfolio comprises of hotels that are branded by Marriott, Hilton and Hyatt. These hotels provide national marketing to support their frequent stay programs that helps them to drive additional revenue. ENN have been successful in their strategy to concentrate on premium brands, which can be clearly seen from its top-line growth of 17% for third-quarter of 2006. Moreover, these brands have helped the company to achieve an occupancy rate of 74%, which is much higher when compared to industry average of 63%."
That's what some CAPS players think about this company. What about you? Is this REIT right? If you'd like to learn more about this stock, or offer your own insights on it or any other stock, join CAPS for free today.
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. Equity Inns is a Motley Fool Income Investor choice. The Motley Fool has a disclosure policy.
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