Three Compelling Reasons Growth Investors Should Consider Meta Platforms (META)

Growth stocks have become a favorite among many investors due to their potential for above-average financial growth. This growth can often catch the market's attention, translating into significant returns. However, identifying a truly great growth stock can be quite challenging.

The difficulty lies in the inherent higher risk and volatility that often accompany these stocks. Investing in a stock that might be experiencing an end to its growth phase can lead to substantial losses.

Fortunately, tools like the Zacks Growth Style Score simplify the search for promising growth stocks. This system goes beyond traditional growth metrics to evaluate a company’s actual growth potential.

Currently, Meta Platforms (META - meta.com) is one of the stocks highlighted by this system. Along with a strong Growth Score, it benefits from a favorable Zacks Rank.

According to research, stocks with superior growth indicators consistently outperform the market. The best returns are observed in stocks that hold a Growth Score of A or B and carry a Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Here are three key reasons why Meta Platforms stands out as a robust growth investment right now.

Earnings Growth Potential

Earnings growth is a critical factor that grabs investors' attention. Stocks that exhibit significant profit growth are more likely to attract interest, making double-digit earnings growth particularly attractive for growth investors.

Meta Platforms demonstrates strong historical performance, with an EPS (earnings per share) growth rate of 18.2%. However, it's the projected growth that truly stands out. This year, the company’s EPS is set to grow by 52.5%, far surpassing the industry average of 30.6%.

Strong Asset Utilization Efficiency

Another often overlooked indicator in growth investing is the asset utilization ratio, also known as the sales-to-total-assets (S/TA) ratio. This metric measures how efficiently a company utilizes its assets to generate revenue.

Meta Platforms boasts an impressive S/TA ratio of 0.67, indicating that the company generates $0.67 in sales for every dollar of assets. This performance eclipses the industry average of 0.57, reflecting a higher efficiency in asset utilization.

Moreover, the company is also expected to achieve substantial sales growth, projected at 20.9% this year compared to the industry average of 6.6%.

Upward Revisions in Earnings Estimates

A crucial aspect that investors should monitor is the trend in earnings estimate revisions. Positive trends in these revisions often correlate strongly with future stock performance.

Currently, earnings estimates for Meta Platforms have been revised upward, with the Zacks Consensus Estimate increasing by 0.4% over the past month.

Conclusion

Meta Platforms has successfully earned a Growth Score of B based on multiple factors, including the ones discussed above, and it holds a Zacks Rank #2 due to positive earnings estimate revisions.

This combination of strong growth indicators suggests that Meta Platforms may be a strong performer in the stock market, making it a compelling option for growth-focused investors.

Meta, Investing, Growth