Understanding Zacks Style Scores and Their Impact on Investing

For both new and experienced investors, the common goals are to navigate the stock market effectively and invest with confidence. Zacks Premium provides various resources to help achieve these objectives.

This service offers daily updates of the Zacks Rank and Zacks Industry Rank, access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all aimed at enhancing your investment knowledge.

Exploring Zacks Style Scores

The Zacks Style Scores, developed alongside the Zacks Rank, serve as complementary tools for assessing stocks based on three key investing strategies. These scores assist investors in identifying stocks likely to outperform the market in the next 30 days.

Each stock is rated using an alphabetic system from A to F, based on its value, growth, and momentum traits. Higher ratings indicate better chances for outperformance.

Categories of Style Scores

Value Score

This score targets investors looking for undervalued stocks. It utilizes ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow to identify stocks priced below their true value before the market catches on.

Growth Score

Growth investors focus on a company’s future potential. The Growth Style Score examines past and projected earnings, sales, and cash flow to find stocks poised for steady growth.

Momentum Score

Momentum investors capitalize on price trends, believing “the trend is your friend.” This score leverages factors like short-term price changes and shifts in earnings estimates to pinpoint optimal buying opportunities.

VGM Score

The VGM Score blends all three styles, serving as a crucial tool alongside the Zacks Rank to find the best stocks based on value, growth expectations, and momentum.

Combining Style Scores with the Zacks Rank

The Zacks Rank, a unique stock-rating model, helps investors craft successful portfolios by utilizing revisions in earnings estimates. Historically, stocks rated #1 (Strong Buy) have averaged a remarkable +25.41% annual return since 1988, significantly outperforming the S&P 500.

However, there are over 800 stocks with high rankings, including more than 200 rated as Strong Buy and around 600 rated as Buy, which can complicate stock selection.

This is where the Style Scores come into play.

To optimize potential returns, investors should target stocks with a Zacks Rank of #1 or #2 that also display Style Scores of A or B, indicating a higher likelihood of success. For stocks rated #3 (Hold), A or B Style Scores are equally important to enhance upside potential.

Example: Meta Platforms (META)

Meta Platforms stands as the world’s largest social media entity, evolving from a singular Facebook app to multiple platforms like Instagram and WhatsApp following various acquisitions. As of March 31, 2024, nearly 3.24 billion people utilize Meta’s family of products daily.

META currently holds a #3 (Hold) rating on the Zacks Rank, with a VGM Score of B.

Momentum traders may find interest in this stock, as it has a Momentum Style Score of A and has experienced a 2.6% rise in the past four weeks.

In fiscal 2024, two analysts have adjusted their earnings estimates upward in the last 60 days, raising the Zacks Consensus Estimate by $0.09 to $22.68 per share. Notably, META has an average earnings surprise of 11.3%.

Considering an Investment in Meta Platforms, Inc. (META)?

Before investing in Meta Platforms, Inc. (META), consider exploring Zacks Investment Research to discover the best stocks to buy over the next 30 days.

Zacks Investment Research has provided valuable investment tools and independent research since 1978. The Zacks Rank system has historically outperformed the S&P 500, achieving an average gain of +24.08% annually from January 1, 1988, to May 6, 2024.

Interested in discovering the latest recommendations? Download the report on the 7 Best Stocks for the Next 30 Days from Zacks Investment Research.

For a free stock analysis on Meta Platforms, Inc. (META), click here.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.