3 Reasons Why Growth Investors Shouldn't Overlook Meta Platforms (META)

Many investors are drawn to growth stocks due to their potential for above-average financial growth, which can lead to substantial market interest and returns. However, finding truly promising growth stocks can often be a challenge.

This challenge arises because growth stocks typically come with higher risks and greater volatility. Investing in a stock that has seen its growth story peak or decline can result in significant losses.

Fortunately, tools like the Zacks Growth Style Score make it easier to identify standout growth stocks. This system assesses a company’s genuine growth potential beyond just traditional metrics.

Meta Platforms (META) is currently featured as a top growth stock by this system. It not only has a solid Growth Score but also holds a strong Zacks Rank.

Research indicates that stocks showcasing robust growth characteristics consistently outperform the market. Stocks that achieve a Growth Score of A or B alongside a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to exhibit even better returns.

Here are three key factors underscoring why Meta Platforms is a compelling option for growth investors at this time.

Earnings Growth

Earnings growth is a critical metric; stocks that demonstrate significant profit increases often capture the attention of investors. For growth investors, double-digit earnings growth is especially appealing and typically signifies favorable prospects for both the company’s future and its stock price.

Meta Platforms boasts a historical earnings per share (EPS) growth rate of 18.2%. However, the focus should be on projected growth. This year, the company’s EPS is anticipated to surge by 52.5%, surpassing the industry average expectation of 30.6% growth.

Impressive Asset Utilization Ratio

The asset utilization ratio, known as the sales-to-total-assets (S/TA) ratio, is an often-overlooked but crucial metric in growth investing. This ratio indicates how effectively a company is using its assets to generate sales.

At present, Meta Platforms holds an S/TA ratio of 0.67, meaning it generates $0.67 in sales for every dollar in assets. This outperforms the industry average of 0.57, indicating higher efficiency.

Furthermore, the company's sales growth looks promising as well, with expectations for a 20.9% increase this year compared to an industry average of just 6.6%.

Promising Earnings Estimate Revisions

Another key consideration for investors is the trend in earnings estimate revisions. A positive revision trend usually bodes well for stock price movements. Research suggests a strong correlation between revisions in earnings estimates and short-term stock performance.

The current-year earnings estimates for Meta Platforms have recently been revised upwards. The Zacks Consensus Estimate has seen a 0.4% increase over the past month.

Bottom Line

Meta Platforms has achieved a Growth Score of B, derived from various positive factors including those mentioned. Additionally, it holds a Zacks Rank of #2 due to favorable revisions in earnings estimates.

This combination indicates that Meta Platforms is a potential outperformer and a worthwhile option for growth investors.

investing, growth, stocks