Why Foot Locker (FL) is such a valuable long-term stock
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The Research Service offers daily Zacks Rank and Zacks Industry Rank updates, full access to the Zacks # 1 Ranking List, Stock Research Reports and Premium Stock screens, all of which will help you to become a smarter and more confident investor.
Zacks Premium also includes access to Zacks style sheet music.
What are Zacks’ style notes?
Zacks Style Scores are a unique set of guidelines that rate stocks against three popular investment types and were developed as complementary metrics for the Zacks Ranking. This combination helps investors choose stocks with the best chance of beating the market over the next 30 days.
Each stock is assigned an alphabetical rating of A, B, C, D or F based on its value, growth and momentum. With this system, an A is better than a B, a B is better than a C, and so on, which means that the higher the score, the better the chances that the stock will outperform.
Style Scores are divided into four categories:
Finding good stocks at good prices and finding out which companies are trading under their true value is what value investors like to focus on. Thus, the Value Style Score takes into account ratios such as P / E, PEG, Price / Sales, Price / Cash Flow, and a multitude of other multiples to highlight the most attractive and discounted stocks.
Growth investors are more concerned with the future prospects of a stock, as well as the overall financial health and soundness of a company. Thus, the Growth Style Score analyzes characteristics such as projected and historical earnings, sales, and cash flow to find stocks that will experience sustainable growth over time.
Dynamic traders and investors live by the saying “the trend is your friend”. This style of investing involves taking advantage of upward or downward trends in a stock’s price or earnings outlook. Using factors such as the weekly price change and the monthly percentage change in earnings estimates, the Momentum Style Score can indicate favorable times to create a position in high momentum stocks.
What if you liked to use all three types of investing? The VGM score is a combination of all style scores, making it one of the most comprehensive metrics to use with the Zacks ranking. It rates each stock based on their combined weighted styles, which selects the companies with the most compelling value, the best growth expectations and the most promising momentum.
How style scores work with the Zacks leaderboard
Zacks Rank, which is a proprietary stock rating model, uses revisions to earnings estimates, or changes to a company’s earnings forecasts, to help build a winning portfolio.
It’s a big hit, with # 1 (strong buy) stocks producing an unmatched average annual return of + 25.41% since 1988. That’s more than double the S&P 500. But due to the large number of stocks that we are evaluating, there are over 200 companies with a strong Buy Rank, plus another 600 with a Rank # 2 (buy), on any given day.
That adds up to over 800 top-rated stocks, and it can be difficult trying to pick the best stocks for you and your portfolio.
This is where Style Scores come in.
You want to make sure that you are buying stocks with the highest probability of success, and in order to do that, you will need to choose stocks with a Zacks # 1 or # 2 rating that also have style scores of A or B. If you as a stock that is only ranked # 3 (hold), it should also have A or B ratings to ensure as much upside potential as possible.
Since 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 # 4 (sell) or # 5 (strong sell) rating, even one with style ratings of A and B, always has a prospect of declining profits, and there is a greater chance that its stock price will drop too much.
So the more stocks you own with a # 1 or # 2 rank and A or B scores, the better.
Stock to watch: Foot Locker (FL)
Founded in 1879 and headquartered in New York City, Foot Locker, Inc. (FL) is a retailer of athletic footwear and apparel. The company operates websites and mobile apps, aligned with the brand names of store banners including footlocker.com, ladyfootlocker.com, six02.com, kidsfootlocker.com, champssports.com, footaction.com, footlocker.ca, footlocker.eu, footlocker .com.au, sidestep-shoes.com, footlocker.hk, footlocker.sg and footlocker.my. Additionally, Foot Locker has franchises in the Middle East.
FL is # 2 (Buy) in the Zacks ranking, with a VGM score of A.
It also benefits from a value style score of A thanks to attractive valuation metrics like a forward P / E ratio of 6.89; value investors should take this into account.
Six analysts revised their earnings estimates upward over the past 60 days for fiscal 2022. Zacks’ consensus estimate rose $ 1.08 to $ 6.91 per share. FL enjoys an average profit surprise of 73.1%.
With a solid Zacks ranking and top VGM value and style scores, FL should be on the shortlist of investors.
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Foot Locker, Inc. (FL): 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.