What is the VGM Score?
If you are familiar with the Zack Style Scores then it will not be hard to grasp the VGM score. V stands for Value, G for Growth and M for Momentum. The VGM score is simply a weighted combination of those scores. The score will be a comprehensive tool that will allow investors to filter through the standard scoring system and better choose winning stocks.
It is important to note that each Style Score has a different weighting. So an A in one Style may carry more or less weight than an A in another Style when it comes to the weighting of the VGM Score. Likewise, an F in one Style may carry more or less weight than an F in another Style when it comes to the weighting of the VGM Score.
What the VGM score can highlight an important factor in a stock that can push the stock price higher. We can essentially filter out the negatives and focus on the positives which drive price. This is an advantage to certain investors that want to focus on a particular kind of stock.
Let's take a look at five top-ranked stocks and how investors can use the VGM Scoring system.
Red Robin Gourmet Burgers (NASDAQ:RRGB) is a casual dining restaurant chain focused on serving an imaginative selection of high quality gourmet burgers in a family-friendly atmosphere. They currently own and operate in 12 states, and have additional restaurants operating under franchise or license agreements in 18 states and Canada.
The company has a $900 Million market cap and a Forward PE of 18. Red Robin pays no dividend and expects EPS to grow at 11.33%.
The company sports Zacks Style Scores of "A" for Growth, "B" for Value and "C" for momentum. At first glance it would make sense for a VGA score to be "B", but because the styles are equally weighted we see a different result. The Zacks VGA score comes in at "A" and tells us that in this situation that Growth, and possibly Value have a higher weighting than Momentum. What we can learn from this is that Growth is an important factor for the stock price to go higher. Investors that are looking for a growth play should buy the stock and then monitor the EPS growth to determine whether the position should be held. If the company outperforms expectation the stock price is likely to rise over time.
Hawaiian Holding (NASDAQ:HA) is a Zacks Rank #1(Strong Buy) that is an airline based out of Hawaiian and engages primarily in the scheduled transportation of passengers, cargo, and mail. They are in an industry that's ranked 611out of 265 (Top 4%) in the Zacks Industry Rank.
Hawaiian has a market cap of $2.5 Billion with a Forward PE of 10. The company pays no dividend, but has an impressive growth rate of 30.97%.
The stock sports Zacks Style Scores of "D" in Momentum, "A" in Value and "B" in Growth. The stock has a VGM Style Sore of "A" showing us that the recent run-up of the stock might have a bit more room. The momentum score is low, but what the VGM tells us is that the value of the company with a Forward PE of 10 is too low. With that, the growth the company is showing is overpowering any negativity the momentum score is showing.
Hawaiian has outperformed the S&P 500 over the last year, up over 135%, while the S&P is negative.
Tyson (NYSE:TSN) is a Zacks Rank #1 (Strong Buy) that is the world's largest fully-integrated producer, processor and marketer of chicken and poultry-based food products They are in an industry that's ranked 3 out of 265 (Top 1%) in the Zacks Industry Rank.
Tyson has a market cap of $24 Billion and a Forward PE of 17. The company pays a dividend of 0.89% and has an expected EPS growth of 11%.
The stock sports Zacks Style Scores of "B" in Value and "A" in Growth and "C" in Momentum. It has a VGM score of "A" that is fueled by its impressive growth and rising estimates. As in the case for Red Robin, Tyson is overweighed in the growth category and the stock price will reflect how well the company does in that area.
Cooper Tire (NYSE:CTB) is a Zacks Rank #1 (Strong Buy) that manufactures and markets replacement tires around the globe. Founded in Findlay, Ohio in 1913, Cooper distributes tires for passenger cars and trucks as well as tires for racing, motorcycles, dealers and retailers.
The company has a market cap of $2 Billion and a Forward PE just under 10. Cooper pays a 1.07% dividend and expects EPS growth to come in at 3%. Cooper sports a Zacks Style Score of "A" in Value< Growth and Momentum. There is no question as to why it might have a VGM score of A as well. The stock is well positioned across the board as analysts continue to take estimates higher.
SpartanNash Company (NASDAQ:SPTN) is a Zacks Rank #1 (Strong Buy) that operates as a food distributor and retailer primarily in the United States. The company operates in three segments: Military, Food Distribution, and Retail. The company's core businesses include distributing food to military commissaries and exchanges and independent and corporate-owned retail stores located in 44 states and the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt. The company sits in an industry that is ranked 47out of 265 (Top 18%) of the Zacks Industry Rank.
SpartanNash has a market cap of $1.1 Billion with a Forward PE of 14. Spartan also pays a dividend of 1.85% and has expected EPS growth of 4.5%.
The stock sports Zacks Style Scores of "A" in Value and Growth and "F" in Momentum. The VGM Score is "A" showing us that the momentum aspect of the stock isn't weighted as much as growth and value. What this tells us is while the momentum might not be so great, the value of the company and the recent growth it has shown is more important to SpartanNash's story. Those investors looking for a value or growth play should give SpartanNash a look.
The VGM Style Score is another useful tool that allows investors to get a better picture of a stock's strengths and weaknesses. I can be a valuable tool that allows investors to filter information and save time in deciding what stocks to invest in.