It doesn't matter if you're a growth, value, income, or momentum-focused investor -- building a successful investment portfolio takes skill, research, and a little bit of luck.
How do you find the right combination of stocks that will generate returns that could fund your retirement, or your kids' college tuition, or your short- and long-term savings goals?
Enter the Zacks Rank.
What is the Zacks Rank?
A unique, proprietary stock-rating model, the Zacks Rank uses earnings estimate revisions, or changes to a company's earnings expectations, to help investors create a winning portfolio.
There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise.
Agreement is the extent to which all brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of analysts revising their estimates higher, the better chance the stock will outperform.
Magnitude is the size of the recent change in the consensus estimate for the current and next fiscal years.
Upside is the difference between the most accurate estimate, which is calculated by Zacks, and the consensus estimate.
Surprise is made up of a company's last few quarters' earnings per share surprises; companies with a positive earnings surprise are more likely to beat expectations in the future.
Each factor is given a raw score, which is recalculated every night and compiled into the Zacks Rank. Utilizing this data, stocks are put into five different groups: Strong Buy, Buy, Hold, Sell, and Strong Sell.
The Power of Institutional Investors
The Zacks Rank also allows individual investors, or retail investors, to benefit from the power of institutional investors.
Institutional investors are the professionals who manage the trillions of dollars invested in mutual funds, investment banks, and hedge funds. Studies have shown that these investors can and do move the market due to the large amounts of money they invest with. Because of this, the market tends to move in the same direction as institutional investors.
In order to determine the fair value of a company and its shares, institutional investors design valuation models that focus on earnings and earnings estimates. Because if you raise earnings estimates, it then creates a higher fair value for a company and its stock price.
Institutional investors then act on these changes in earnings estimates, typically buying stocks with rising estimates and selling those with falling estimates; an increase in earnings estimates can translate into higher stock prices and bigger gains for the investor.
Retail investors who get in at the first sign of upward revisions have a distinct advantage over larger investors since it can often take weeks, if not months, for an institutional investor to build a position. They'll also benefit from the expected institutional buying that could follow.
Not only can the Zacks Rank help you take advantage of trends in earnings estimate revisions, but it can also provide a way to get into stocks that are highly sought after by professionals.
How to Invest with the Zacks Rank
The Zacks Rank is known for transforming investment portfolios. In fact, a portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 32 years, with an average annual return of +25.41%.
Moreover, stocks with a new #1 (Strong Buy) ranking have some of the biggest profit potential, while those that fell to a #4 (Sell) or #5 (Strong Sell) have some of the worst.
Let's take a look at Shockwave Medical , which was added to the Zacks Rank #1 list on July 13, 2022.
ShockWave Medical is a medical device company committed to developing and commercializing products created to change the way calcified cardiovascular disease is treated. The company aims to set a new standard of care for medical device treatment of atherosclerotic cardiovascular disease (atherosclerosis) through its differentiated and proprietary local delivery of sonic pressure waves for the treatment of calcified plaque, referred to as intravascular lithotripsy by the company. ShockWave Medical’s IVL system supports its IVL technology and is a minimally invasive, simple, and safe way to substantially enhance patient outcomes. The company caters to interventional cardiologists, vascular surgeons, and interventional radiologists through sales representatives and sales managers and distributors.
For fiscal 2022, three analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.52 to $2.57 per share. SWAV boasts an average earnings surprise of 180.1%.
Earnings are forecasted to see growth of 1088.5% for the current fiscal year, and sales are expected to increase 102.3%.
Even more impressive, SWAV has gained in value over the past four weeks, up 35% compared to the S&P 500's loss of 4.1%.
Bottom Line
With a #1 (Strong Buy) ranking, positive trend in earnings estimate revisions, and strong market momentum, Shockwave Medical should be on investors' shortlist.
If you want even more information on the Zacks Ranks, or one of our many other investing strategies, check out the Zacks Education home page.
Discover Today's Top Stocks
Our private Zacks #1 Rank List, based on our quantitative Zacks Rank stock-rating system, has more than doubled the S&P 500 since 1988. Applying the Zacks Rank in your own trading can boost your investing returns on your very next trade. See Today's Zacks #1 Rank List >>
Image: Bigstock
How to Find Strong Buy Medical Stocks Using the Zacks Rank
It doesn't matter if you're a growth, value, income, or momentum-focused investor -- building a successful investment portfolio takes skill, research, and a little bit of luck.
How do you find the right combination of stocks that will generate returns that could fund your retirement, or your kids' college tuition, or your short- and long-term savings goals?
Enter the Zacks Rank.
What is the Zacks Rank?
A unique, proprietary stock-rating model, the Zacks Rank uses earnings estimate revisions, or changes to a company's earnings expectations, to help investors create a winning portfolio.
There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise.
Agreement is the extent to which all brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of analysts revising their estimates higher, the better chance the stock will outperform.
Magnitude is the size of the recent change in the consensus estimate for the current and next fiscal years.
Upside is the difference between the most accurate estimate, which is calculated by Zacks, and the consensus estimate.
Surprise is made up of a company's last few quarters' earnings per share surprises; companies with a positive earnings surprise are more likely to beat expectations in the future.
Each factor is given a raw score, which is recalculated every night and compiled into the Zacks Rank. Utilizing this data, stocks are put into five different groups: Strong Buy, Buy, Hold, Sell, and Strong Sell.
The Power of Institutional Investors
The Zacks Rank also allows individual investors, or retail investors, to benefit from the power of institutional investors.
Institutional investors are the professionals who manage the trillions of dollars invested in mutual funds, investment banks, and hedge funds. Studies have shown that these investors can and do move the market due to the large amounts of money they invest with. Because of this, the market tends to move in the same direction as institutional investors.
In order to determine the fair value of a company and its shares, institutional investors design valuation models that focus on earnings and earnings estimates. Because if you raise earnings estimates, it then creates a higher fair value for a company and its stock price.
Institutional investors then act on these changes in earnings estimates, typically buying stocks with rising estimates and selling those with falling estimates; an increase in earnings estimates can translate into higher stock prices and bigger gains for the investor.
Retail investors who get in at the first sign of upward revisions have a distinct advantage over larger investors since it can often take weeks, if not months, for an institutional investor to build a position. They'll also benefit from the expected institutional buying that could follow.
Not only can the Zacks Rank help you take advantage of trends in earnings estimate revisions, but it can also provide a way to get into stocks that are highly sought after by professionals.
How to Invest with the Zacks Rank
The Zacks Rank is known for transforming investment portfolios. In fact, a portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 32 years, with an average annual return of +25.41%.
Moreover, stocks with a new #1 (Strong Buy) ranking have some of the biggest profit potential, while those that fell to a #4 (Sell) or #5 (Strong Sell) have some of the worst.
Let's take a look at Shockwave Medical , which was added to the Zacks Rank #1 list on July 13, 2022.
ShockWave Medical is a medical device company committed to developing and commercializing products created to change the way calcified cardiovascular disease is treated. The company aims to set a new standard of care for medical device treatment of atherosclerotic cardiovascular disease (atherosclerosis) through its differentiated and proprietary local delivery of sonic pressure waves for the treatment of calcified plaque, referred to as intravascular lithotripsy by the company. ShockWave Medical’s IVL system supports its IVL technology and is a minimally invasive, simple, and safe way to substantially enhance patient outcomes. The company caters to interventional cardiologists, vascular surgeons, and interventional radiologists through sales representatives and sales managers and distributors.
For fiscal 2022, three analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.52 to $2.57 per share. SWAV boasts an average earnings surprise of 180.1%.
Earnings are forecasted to see growth of 1088.5% for the current fiscal year, and sales are expected to increase 102.3%.
Even more impressive, SWAV has gained in value over the past four weeks, up 35% compared to the S&P 500's loss of 4.1%.
Bottom Line
With a #1 (Strong Buy) ranking, positive trend in earnings estimate revisions, and strong market momentum, Shockwave Medical should be on investors' shortlist.
If you want even more information on the Zacks Ranks, or one of our many other investing strategies, check out the Zacks Education home page.
Discover Today's Top Stocks
Our private Zacks #1 Rank List, based on our quantitative Zacks Rank stock-rating system, has more than doubled the S&P 500 since 1988. Applying the Zacks Rank in your own trading can boost your investing returns on your very next trade. See Today's Zacks #1 Rank List >>