Why AFRM is a Top Momentum Stock

Understanding the Zacks Premium Investment Tools

For both new and experienced investors, maximizing returns in the stock market while maintaining confidence is a shared goal. One way to achieve this is through the use of comprehensive investment tools like Zacks Premium. This service offers a wide range of resources designed to help investors make informed decisions and build successful portfolios.

Zacks Premium provides daily updates on the Zacks Rank and Zacks Industry Rank, giving users insights into the performance of different stocks and industries. It also includes access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens. These features empower investors to make smarter, more confident choices when selecting stocks for their portfolios.

Another key component of Zacks Premium is the Zacks Style Scores. These scores are developed alongside the Zacks Rank and serve as complementary indicators that assess stocks based on three widely-followed investing methodologies: value, growth, and momentum.

What Are the Zacks Style Scores?

The Zacks Style Scores evaluate stocks using three main categories: Value, Growth, Momentum, and VGM (Value-Growth-Momentum). Each stock is assigned a rating of A, B, C, D, or F, with higher scores indicating a better chance of outperforming the market over the next 30 days. An A rating is better than a B, which is better than a C, and so on.

Value Score

Value investors focus on finding high-quality stocks at attractive prices before the broader market recognizes their true value. The Value Style Score uses financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow to identify stocks that are undervalued and have strong potential for appreciation.

Growth Score

Growth investors prioritize companies with strong financial health and positive future outlooks. The Growth Style Score considers projected and historical earnings, sales, and cash flow to uncover stocks that are likely to experience long-term, sustainable growth.

Momentum Score

Momentum investors rely on trends, often following the adage "the trend is your friend." The Momentum Style Score evaluates factors such as one-week price changes and monthly percentage changes in earnings estimates to determine favorable times to buy high-momentum stocks.

VGM Score

For investors seeking a balanced approach, the VGM Score combines the Value, Growth, and Momentum Style Scores into a single metric. It helps identify stocks that offer the best combination of value, growth potential, and momentum. This score is particularly useful when used in conjunction with the Zacks Rank.

How Style Scores Work with the Zacks Rank

The Zacks Rank is a proprietary stock-rating model that leverages earnings estimate revisions to guide investors in building a successful portfolio. Stocks ranked #1 (Strong Buy) have historically delivered an average annual return of +23.75% since 1988—more than double the S&P 500's performance over the same period.

However, with over 800 top-rated stocks available each day, it can be overwhelming to choose the right ones. This is where the Style Scores come into play. Investors should look for stocks with a Zacks Rank of #1 or #2 that also have Style Scores of A or B, as these combinations offer the highest probability of success.

Even if a stock has strong Style Scores, its Zacks Rank must still be considered. For example, a stock with a #4 (Sell) or #5 (Strong Sell) rating, despite having A or B Style Scores, may have a declining earnings forecast and a higher likelihood of price declines.

Stock to Watch: Affirm Holdings (AFRM)

Affirm Holdings, Inc. (AFRM), headquartered in San Francisco, CA, is a financial technology company that provides consumers with flexible installment loans at the point of sale. By partnering with merchants, Affirm enables customers to pay for purchases over time, offering both interest-free and interest-bearing options.

Currently, AFRM holds a Zacks Rank of #3 (Hold) and a VGM Score of B. Despite this, it has a Momentum Style Score of B, and shares have risen 10.5% over the past four weeks. In the last 60 days, one analyst revised their earnings estimate upward, leading to an increase in the Zacks Consensus Estimate to $0.05 per share. AFRM also boasts an average earnings surprise of +102.2%.

With a solid Zacks Rank and strong Momentum and VGM Style Scores, AFRM is a stock worth considering for investors looking for potential growth opportunities.