The Zacks Rank system is the premier metric used to identify how a stock is expected to perform over a 1-3 month time period. More specifically, a company that receives the coveted Zacks Rank #1 (Strong Buy) designation is expected to be one of the best performing stocks over the near term as only the top 5% of all companies rated by Zacks receives this unique valuation. The ranking system helps identify companies both big and small, and has a proven track record of positive returns.
Not only does this system help you identify the best of the best, but it also enables you to stay in these top companies while they continue to appreciate in value past the initial 1-3 month time horizon. Below is an example of how this system identifies a growing company, and by following the Zacks ranking system, enables you to stay in the stock beyond the three month time frame to capture outsized gains.
Example: YY Inc. (YY - Free Report)
YY Inc. (YY - Free Report) is a communication social platform, which engages users in online group activities through voice, text and video. The Company's Platform consists of YY Client, the YY.com and Duowan.com web portals, Mobile YY and Web-based YY. YY Inc. is based in Guangzhou, the People's Republic of China.
On April 14th 2017, YY received a Zacks Rank #1 (Strong Buy) designation after its Q4 16 earnings announcement. The company posted year over year increases in net revenues +30.8%, and earnings +45.8%. The big driver behind the impressive results was their total live streaming paying users which grew by +91.9% YoY to 5.2 million. Management also commented that this growth was a testament to its solid strength, and long-term competitiveness in both of its platforms. This was further bolstered by management’s expectation that net revenues would grow between +33.4-39.5% in Q1 17. This news caused analyst’s estimates to rise for the quarter and FY 17. The stock price closed at $43.99 on April 14th.
YY crushed both top and bottom line expectations for the next three consecutive quarters by posting strong year over year gains; Q1 earnings +135% and revenues +28.5%, Q2 earnings +70% and revenues +29.2%, Q3 earnings +54% and revenues +48.6%. These impressive beats caused analyst estimates to jump each quarter after the earnings reports.
On July 14th, three months after YY earned its Zacks Rank #1, the stock price closed at $63.79, a +45% gain. The stock price rose after each earnings report; Q2 earnings August 10th $77.86, a +77% gain, Q3 earnings November 15th $111.39, a +153% gain (from April 14th). After the Q3 announcement, the stock price continued to rise and on December 22nd YY closed at $114.60, a +161% gain from when it became a Zacks Rank #1.
The table below shows the price performance of YY (in green), and the 12 month forward looking EPS estimate (in red) from when it became a Zacks Rank #1 till the close of the bell December 22nd.
Overall, by utilizing the Zacks Ranking system, you can easily identify the elite stocks which are best positioned to beat the market on a consistent basis, and how to stay in those top stocks as they continue to grow.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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