Maximizing benefits from the stock market and investing with assurance are typical objectives for both novice and experienced investors, and Zacks Premium provides various methods to achieve these goals.
The research service provides 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, all designed to make you a more informed and self-assured investor.
It also provides access to the Zacks Style Scores.
What are the Zacks Style Metrics?
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.
Stocks are given a rating of A, B, C, D, or F based on their value, growth, and momentum factors. The higher the rating, the greater the likelihood that the stock will perform well; an A is superior to a B, which is better than a C, and so forth.
The Style Ratings are categorized into four sections:
Value Score
Value investors focus on identifying strong stocks that are available at favorable prices, aiming to find companies that are being sold below their actual worth before the general market recognizes this opportunity. The Value Style Score employs metrics such as P/E, PEG, Price/Sales, Price/Cash Flow, and various other multiples to identify the most appealing and undervalued stocks.
Growth Score
Investors focused on growth are more interested in a company's financial stability and its potential for future development. The Growth Style Score looks at factors such as expected and past earnings, sales, and cash flow to identify stocks that are likely to show consistent growth in the long run.
Momentum Score
Traders and investors who follow momentum strategies often adhere to the belief that "the trend is your friend." This approach focuses on capitalizing on rising or falling trends in a stock's price or earnings expectations. By considering elements such as the price movement over one week and the monthly percentage change in earnings forecasts, the Momentum Style Score can help identify opportune moments to enter positions in stocks with strong momentum.
VGM Score
If you're looking for a blend of all three Style Scores, the VGM Score is the tool you need. It evaluates each stock based on their combined weighted styles, allowing you to identify companies that offer the most appealing value, the strongest growth potential, and the most encouraging momentum. It is also one of the top indicators to use alongside the Zacks Rank.
How Zacks Rank Determines Style Scores
A unique stock-rating system, the Zacks Rank leverages the impact of changes in a company's earnings projections to assist investors in building a profitable portfolio.
It has achieved significant success, with #1 (Strong Buy) stocks delivering an exceptional average annual return of +23.81% since 1988. This outperforms the S&P 500 by more than double. However, due to the extensive number of stocks we evaluate, there are more than 200 companies rated as Strong Buy, along with an additional 600 companies rated as #2 (Buy) on any given day.
However, selecting the appropriate stocks for you and your investment objectives can seem daunting when there are more than 800 highly-rated stocks available.
That's when Style Scores become relevant.
You should ensure you are purchasing stocks that have the greatest chance of success by selecting those with a Zacks Rank of #1 or #2 and Style Scores of A or B. If you are interested in a stock with a #3 (Hold) rank, it's still advisable for it to have Scores of A or B to maximize potential gains.
Because the Scores were designed to complement the Zacks Rank, the trend of a stock's earnings estimate changes should be an important consideration when selecting stocks to purchase.
Here's an example: a stock assigned a #4 (Sell) or #5 (Strong Sell) rating, even if it has Style Scores of A and B, may still have a declining earnings forecast, and a higher likelihood that its stock price will drop.
Therefore, the more stocks you hold that have a #1 or #2 Rating and Grades of A or B, the better.
Stock to Monitor: Fresenius (FMS)
Headquartered in Bad Homburg, Germany, Fresenius Medical Care AG & Co. KGaA is among the world's leading integrated suppliers of products and services for people receiving dialysis due to chronic kidney disease, catering to more than 299,000 patients worldwide. The company functions through two primary divisions: Care Delivery and Care Enablement, both contributing to its position as a leader in kidney care.
FMS is ranked #2 (Buy) on the Zacks Rank, and has a VGM Score of B.
It also has a Value Style Score of B due to appealing valuation measures such as a forward P/E ratio of 11.59; value investors would be wise to pay attention.
Two analysts have raised their earnings forecast for fiscal 2025 within the past 60 days, with the Zacks Consensus Estimate rising by $0.06 to $2.30 per share. FMS has an average earnings surprise of +7.6%.
Featuring a strong Zacks Rank along with high Value and VGM Style Scores, FMS is worth considering for investors' attention.
This piece was first released on Zacks Investment Research (Healthy urvival).