Regardless of your age or level of experience, maximizing returns from the stock market and investing with assurance are shared objectives among all investors. Fortunately, Zacks Premium provides various methods to achieve both.
Including daily updates on the Zacks Rank and Zacks Industry Rank, complete access to the Zacks #1 Rank List, Equity Research reports, and advanced stock screening tools, this research service can assist you in becoming a more knowledgeable and confident investor.
Zacks Premium offers access to the Zacks Style Scores as well.
What are the Zacks Style Ratings?
Created in conjunction with the Zacks Rank, the Zacks Style Scores are a set of additional metrics designed to assist investors in selecting stocks that have the highest potential to outperform the market within the next 30 days.
Each stock receives an alphabetical rating of A, B, C, D, or F depending on its value, growth, and momentum characteristics. Using this system, an A is considered superior to a B, a B is better than a C, and so forth, indicating that higher scores correspond to a greater likelihood of the stock performing well.
The Style Ratings are categorized into four sections:
Value Score
Investment professionals who focus on value investing enjoy discovering quality stocks at favorable prices, particularly before the general market recognizes a stock's actual worth. By using metrics such as P/E, PEG, Price/Sales, Price/Cash Flow, and various other multiples, the Value Style Score helps pinpoint the most appealing and undervalued stocks.
Growth Score
Investors focused on growth are more interested in a company's financial stability and overall condition, as well as its potential for future development. The Growth Style Score evaluates factors such as expected and past earnings, revenue, and cash flow to identify stocks that are likely to show consistent growth in the long run.
Momentum Score
Investors who follow the philosophy that "the trend is your friend" focus on capitalizing on rising or falling trends in a stock's price or earnings expectations. By considering elements such as the one-week price movement and the monthly percentage change in earnings forecasts, the Momentum Style Score can assist in identifying optimal moments to purchase high-momentum stocks.
VGM Score
If you enjoy utilizing all three types of investment strategies, the VGM Score is tailored for you. It combines all Style Scores and serves as a key metric when used alongside the Zacks Rank. The VGM Score evaluates each stock based on their weighted styles, helping identify companies that offer the most compelling value, strongest growth potential, and most encouraging momentum.
How Zacks Rank Determines Style Scores
The Zacks Rank is a unique stock evaluation system that utilizes shifts in earnings forecasts, or adjustments to a company's financial expectations, to assist investors in creating a profitable investment portfolio.
#1 (Strong Buy) stocks have delivered an exceptional average annual return of +23.81% since 1988, outperforming the S&P 500 by more than double during the same period. Nevertheless, the Zacks Rank evaluates a large number of stocks, with over 200 companies holding a Strong Buy rating and approximately 600 firms having a #2 (Buy) rating on any particular day.
However, selecting the appropriate stocks for you and your investment objectives can seem daunting when there are more than 800 highly-rated options available.
That's where Style Ratings are applied.
To maximize the likelihood of significant gains, it's advisable to always look for stocks with a Zacks Rank of #1 or #2 that also have Style Scores of A or B, as this combination offers the greatest chance of success. If you're evaluating stocks with a #3 (Hold) rank, it's crucial they still have Scores of A or B to maximize potential upside.
The movement of a stock's earnings forecast adjustments should always be an important consideration when selecting stocks to purchase, as the Scores were designed to complement the Zacks Rank.
For example, a stock rated #4 (Sell) or #5 (Strong Sell), even if it has Scores of A and B, still shows a declining earnings outlook, and is more likely to experience a drop in its stock price.
Therefore, the more stocks you have that are ranked #1 or #2 with grades of A or B, the better.
Stock to Monitor: The Cooper Companies (COO)
The Cooper Companies is a multinational medical device corporation that operates through two primary divisions: CooperVision (CVI) and CooperSurgical (CSI). CVI specializes in contact lenses, with a significant market position in daily silicone hydrogel lenses, toric lenses, multifocal lenses, and myopia control. The company's leading MyDay line, which includes MyDay Energys and expanded options for toric and multifocal lenses, maintains a strong premium market share, while MiSight targets the increasing prevalence of myopia. CSI offers products and services related to fertility and women's health, providing in-vitro fertilization (IVF) solutions, contraceptives like Paragard, and various office and surgical equipment.
The COO is ranked #3 (Hold) on the Zacks Rank, featuring a VGM Score of B.
It also features a Value Style Score of B due to appealing valuation measures such as a forward P/E ratio of 16.8; value investors would be wise to pay attention.
In fiscal year 2025, six analysts have raised their earnings forecasts within the past 60 days, leading the Zacks Consensus Estimate to rise by $0.03 to $4.09 per share. The COO has an average earnings surprise of +2.5%.
Having a strong Zacks Rank along with high Value and VGM Style Scores, COO is worth considering for investors.
This piece was first released on Zacks Investment Research (Healthy urvival).