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

Growth stocks often attract investors due to their potential for above-average financial growth, allowing them to capture the market's attention and deliver significant returns. However, identifying a quality growth stock can be challenging.

The difficulty lies in the fact that growth stocks tend to carry a level of risk and volatility above the market average. Investing in a stock whose growth prospects are declining or have already peaked can lead to substantial losses.

Fortunately, tools like the Zacks Growth Style Score provide insights beyond typical growth metrics, helping investors assess a company’s future growth prospects more accurately.

Currently, Meta Platforms (META) is flagged as a strong candidate by this system. With a solid Growth Score and a high Zacks Rank, it stands out in the crowded field of growth stocks.

Research indicates that stocks with robust growth characteristics typically outperform the market. Furthermore, stocks that have a Growth Score of A or B combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) show even greater returns.

Here are three key reasons why Meta Platforms is a compelling choice for growth investors.

Earnings Growth

Earnings growth is a critical aspect that most investors prioritize, as increasing profit levels draw significant interest. For those focused on growth, a double-digit earnings growth rate is especially appealing, suggesting robust future prospects and potential price increases.

Meta Platforms boasts a historical EPS growth rate of 18.2%. However, investors should focus on projected earnings. This year, the company’s EPS is anticipated to increase by 52.5%, significantly surpassing the industry average of 30.6%.

Impressive Asset Utilization Ratio

The asset utilization ratio, also known as the sales-to-total-assets (S/TA) ratio, is another crucial metric in growth investing that is often overlooked. This ratio shows how effectively a company is leveraging its assets to generate sales.

Currently, Meta Platforms has an S/TA ratio of 0.67, indicating that the company generates $0.67 in sales for every dollar of assets. This efficiency is higher than the industry average of 0.57.

Alongside asset utilization, sales growth is equally important. Meta Platforms appears strong in this regard, with projected sales growth of 20.9% this year, compared to the industry average of 6.6%.

Promising Earnings Estimate Revisions

Another factor worth considering is the trend in earnings estimate revisions. An upward trend in revisions is a positive sign, as research demonstrates a strong correlation between these trends and short-term stock price movements.

Lately, the earnings estimates for Meta Platforms have been revised upward. Over the past month, the Zacks Consensus Estimate for the current year has increased by 0.4%.

Bottom Line

Meta Platforms has acquired a Growth Score of B based on several positive indicators, including those discussed above. Furthermore, it holds a Zacks Rank of #2 due to favorable earnings estimate revisions.

This combination suggests that Meta Platforms is a likely outperformer, making it an excellent opportunity for growth investors.

Growth, Investing, Earnings