JTaking full advantage of the stock market and investing with confidence are common goals for new and old investors, and Zacks Premium offers many different ways to do both.

The popular research service can help you become a smarter, more confident investor, giving you access to daily updates from the Zacks Ranking and Zacks Industry Ranking, Zacks #1 Ranking List, stock research and premium stock screens.

It also includes access to Zacks style sheet music.

What are Zacks style scores?

Zacks Style Scores, developed alongside the Zacks Ranking, are complementary indicators that rate stocks based on three widely followed investment methodologies; they also help investors choose stocks that have the best chance of beating the market over the next 30 days.

Each stock is assigned a rating of A, B, C, D or F based on its value, growth and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, etc. This means that the higher the score, the more likely the stock is to outperform.

Style Scores are divided into four categories:

Value Rating

For value investors, it’s about finding good stocks at good prices and finding out which companies are trading at fair value before the market takes a swing. The Value Style Score uses ratios such as P/E, PEG, Price/Sales, Price/Cash Flow and a host of other multiples to help select the most attractive and discounted stocks.

Growth score

While good value is important, growth-oriented investors focus more on a company’s financial strength and health, as well as its future prospects. The Growth Style Score considers forecasted and historical earnings, sales and cash flow to uncover stocks that will experience sustainable long-term growth.

Momentum Score

Aggressive investors, who live by the saying “the trend is your friend”, are more interested in taking advantage of rising or falling trends in a stock’s price or earnings prospects. Using the week-to-week price change and monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.

VGM score

If you enjoy using all three types of investing, the VGM score is for you. It’s a combination of all Style Scores, and it’s an important indicator to use with Zacks Rank. The VGM score rates each stock based on its shared weighted styles, narrowing down the companies with the most attractive value, the best growth forecasts and the most promising momentum.

How Style Scores Work with Zacks Ranking

A proprietary stock rating model, Zacks Rank uses the power of earnings estimate revisions, or changes to a company’s earnings outlook, to help investors create a performing portfolio.

Stock #1 (Strong Buy) has produced an unmatched average annual return of +25.41% since 1988, more than double the performance of the S&P 500 over the same period. However, the Zacks Rank looks at a ton of stocks, and there can be over 200 companies with a Strong Buy rank, and another 600 with a #2 (Buy) rank, on any given day.

With over 800 top-rated stocks to choose from, it can certainly feel overwhelming deciding which ones are right for you and your investment journey.

This is where Style Scores come in.

You want to make sure you’re buying stocks with the highest probability of success, and to do that you’ll need to choose stocks with a Zacks #1 or #2 rating that also have A or B style scores. you like a security that is only ranked #3 (Hold), it should also have scores of A or B to ensure as much upside potential as possible.

Because the scores were created to work with the Zacks Ranking, the direction of revisions to a stock’s earnings estimates should be a key factor when deciding which stocks to buy.

Here’s an example: a stock with a rating of #4 (sell) or #5 (strong sell), even one with style scores of A and B, still has a downward earnings outlook, and a higher chance that its share price will also decline.

So the more stocks you have with a rank of #1 or #2 and scores of A or B, the better.

Stock to Watch: Dollar Tree (DLTR)

Founded in 1986 and based in Chesapeake, Virginia, Dollar Tree Inc. is an operator of discount variety stores featuring merchandise and other assortments. Its stores operate successfully in major metropolitan areas, mid-sized cities and small towns. The company offers a wide range of quality everyday general merchandise in many categories including housewares, seasonal goods, candy and food, toys, health and beauty care, gifts, party favors, stationery, books, personal accessories and other consumer items. Its stores are supported by a national logistics network and distribution centers.

DLTR is a #3 (Hold) on the Zacks rank, with a VGM score of B.

Additionally, the company could be a top pick for growth investors. DLTR has a growth style score of B, forecasting year-over-year earnings growth of 35.2% for the current fiscal year.

Eight analysts revised their earnings estimate higher in the past 60 days for fiscal 2023, while Zacks’ consensus estimate rose $0.54 to $7.84 per share. DLTR also shows an average earnings surprise of 11.8%.

With a strong Zacks ranking and top VGM growth and style scores, DLTR should be on the shortlist for investors.

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Dollar Tree, Inc. (DLTR): Free Stock Analysis Report

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