The Four Factors behind the Zacks Rank

The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside, and Surprise.

Agreement

The extent to which all brokerage analysts are revising their EPS estimates in the same direction. The more analysts that are revising estimates upward, the higher the Zacks Rank.

Magnitude

The size of recent changes in the consensus estimate for the current fiscal year and the next fiscal year. For example, an earnings estimate revision that causes the consensus estimate to increase by 6% is a more powerful signal than an earnings estimate revision that causes a 2% rise in the consensus estimate.

Upside

This is the difference between the most accurate estimate and the consensus estimate.

Surprise

When the earnings reported in a company's quarterly or annual report are above or below analysts' earnings estimates. A company that reports a positive surprise for the most recent quarter is more likely to have a positive earnings surprise in the next quarter as well (and visa versa). The Zacks Rank calculations factor in the last quarter's EPS surprise.

Every night we recalculate these four factors for the universe of stocks covered by the brokerage analyst community (approximately 4,400 stocks). The four measures are combined into a composite score, which is then used to assign a Zacks Rank.

"The Zacks #1 Rank leads me to stronger stocks."

Clarence Feinour

Reading, PA

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Zacks Rank Guide Table of Contents

(A version of this guide formatted for printing is also available.)