By Rebecca Lipman, Kapitall Editor When short sellers "cover" their position on a stock they signal optimism, meaning they believe the stock has more upside (price increase) than downside ahead. This information is valuable all year long, but it is especially interesting around earnings season. (Related List: Warning: 6 Stocks Reporting Earnings This Week With History of Disappointment) When stocks report earnings they have the chance to surprise investors, in a good way or bad, by presenting numbers that either beat or fall below expectations. This is known as an "earnings surprise" and it has the potential to cause significant shifts in stock prices. We had an idea: Let's take a look at stocks reporting earnings this week (February 26-29) with two bullish signals: 1) Significant short covering - shares shorted have decreased month over month. Again, this is a sign that short sellers, who benefit when share prices fall, think these stocks will increase in value 2) A history of positive earning surprises - We looked for stocks that have reported at least an average 5% above estimated EPS over the past 5 quarters. Past performance is no guarantee of the future, but this might imply the market is continually undervaluing these stocks. We were left with 4 names. What do you think is in store for these names? Use this as a starting point for your own analysis. List Average 1-Year Return: -11%1. BroadSoft, Inc. ( BSFT): Provides software that enables fixed-line, mobile, and cable service providers to deliver voice and multimedia services over Internet protocol (IP) based networks. Market cap at $913.5M, most recent closing price at $33.11. Shares shorted have decreased from 4.42M to 3.97M over the last month, a decrease which represents about 1.64% of the company's float of 27.48M shares. Days to cover ratio at 9.4 days.