For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium provides lots of different ways to do both.
Featuring daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, the research service can help you become a smarter, more self-assured investor.
Zacks Premium also includes the Zacks Style Scores.
What are the Zacks Style Scores?
Developed alongside the Zacks Rank, the Zacks Style Scores are a group of complementary indicators that help investors pick stocks with the best chances of beating the market over the next 30 days.
Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so on.
The Style Scores are broken down into four categories:
Value Score
Value investors love finding good stocks at good prices, especially before the broader market catches on to a stock’s true value. Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks.
Growth Score
Growth investors are more concerned with a stock’s future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.
Momentum Score
Momentum trading is all about taking advantage of upward or downward trends in a stock’s price or earnings outlook, and these investors live by the saying “the trend is your friend.” The Momentum Style Score can pinpoint good times to build a position in a stock, using factors like one-week price change and the monthly percentage change in earnings estimates.
VGM Score
What if you like to use all three types of investing? The VGM Score is a combination of all Style Scores, making it one of the most comprehensive indicators to use with the Zacks Rank. It rates each stock on their combined weighted styles, which helps narrow down the companies with the most attractive value, best growth forecast, and most promising momentum.
How Style Scores Work with the Zacks Rank
The Zacks Rank, which is a proprietary stock-rating model, employs earnings estimate revisions, or changes to a company’s earnings expectations, to make building a winning portfolio easier.
It’s highly successful, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988. That’s more than double the S&P 500. But because of the large number of stocks we rate, there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.
But it can feel overwhelming to pick the right stocks for you and your investing goals with over 800 top-rated stocks to choose from.
That’s where the Style Scores come in.
To have the best chance of big returns, you’ll want to always consider stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B, which will give you the highest probability of success. If you’re looking at stocks with a #3 (Hold) rank, it’s important they have Scores of A or B as well to ensure as much upside potential as possible.
Since the Scores were created to work together with the Zacks Rank, the direction of a stock’s earnings estimate revisions should be a key factor when choosing which stocks to buy.
Here’s an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.
Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.
Stock to Watch: ZTO Express (Cayman) Inc. (ZTO Quick QuoteZTO – Free Report)
Founded in 2009, ZTO Express is a leading player in the field of express delivery in China. This Shanghai-based company went public in 2016. Its American Depository Shares (ADSs) have been trading on the NYSE since Oct 27, 2016. The ticker symbol is ZTO.
ZTO is a #3 (Hold) on the Zacks Rank, with a VGM Score of A.
Additionally, the company could be a top pick for growth investors. ZTO has a Growth Style Score of A, forecasting year-over-year earnings growth of 26% for the current fiscal year.
Four analysts revised their earnings estimate higher in the last 60 days for fiscal 2023, while the Zacks Consensus Estimate has increased $0.06 to $1.55 per share. ZTO also boasts an average earnings surprise of 22%.
With a solid Zacks Rank and top-tier Growth and VGM Style Scores, ZTO should be on investors’ short list.