Why Dominion Energy (D) Leads as a Top Momentum Stock for the Long Term

Understanding the Zacks Style Scores and Their Role in Investment Decisions

Investing in the stock market can be both exciting and challenging, regardless of your experience level. Whether you're just starting out or have been investing for years, the goal of making informed decisions and maximizing returns is universal. One powerful tool that can help investors achieve these goals is the Zacks Premium service, which provides a comprehensive suite of research and analysis tools.

At the heart of this service are the Zacks Style Scores, which work in tandem with the Zacks Rank to offer a more nuanced approach to stock selection. These scores are designed to evaluate stocks based on three key investment strategies: value, growth, and momentum. By combining these factors, investors can identify stocks with the best potential to outperform the market over the next 30 days.

The Three Pillars of the Zacks Style Scores

Each stock receives a rating from A to F, with A being the highest and F the lowest. This grading system mirrors traditional academic performance, where an A represents the best possible outcome. Here's a breakdown of the three main components:

Value Score

Value investors focus on finding undervalued stocks that offer strong fundamentals at attractive prices. The Value Style Score takes into account financial metrics such as the price-to-earnings (P/E) ratio, price-to-earnings growth (PEG) ratio, and other valuation multiples. These indicators help identify companies that may be trading below their intrinsic value, offering potential for long-term gains.

Growth Score

Growth investors prioritize companies with strong future earnings potential and robust financial health. The Growth Style Score evaluates factors like projected and historical earnings, sales growth, and cash flow. This score helps identify stocks that are likely to experience sustained growth over time, making them appealing to investors looking for capital appreciation.

Momentum Score

Momentum investing is all about riding the wave of positive trends. The Momentum Style Score analyzes recent price movements and changes in earnings estimates to determine whether a stock is gaining or losing traction. Investors who follow this strategy often look for stocks that show consistent upward momentum, as they believe the trend is a strong indicator of future performance.

The VGM Score: Combining All Three Approaches

For investors who want to take a balanced approach, the VGM Score offers a unique advantage. It combines the Value, Growth, and Momentum scores into a single rating, providing a well-rounded assessment of a stock's overall appeal. This score is particularly useful when used alongside the Zacks Rank, as it helps narrow down the most promising investment opportunities.

How the Zacks Style Scores Work with the Zacks Rank

The Zacks Rank is a proprietary stock-rating model that leverages earnings estimate revisions to guide investors toward potentially high-performing stocks. Since 1988, stocks ranked #1 (Strong Buy) have delivered an average annual return of +23.75%, significantly outperforming the S&P 500. However, with over 800 top-rated stocks available at any given time, selecting the best options can be overwhelming.

This is where the Zacks Style Scores come into play. To maximize returns, investors should look for stocks with a Zacks Rank of #1 or #2 and Style Scores of A or B. Even if a stock has a lower rank, such as #3 (Hold), it’s still worth considering if it has strong Style Scores. However, it's important to note that a stock with a #4 (Sell) or #5 (Strong Sell) rank, even with high Style Scores, may still carry significant risks due to declining earnings forecasts.

A Stock to Watch: Dominion Energy (D)

Dominion Energy (D), based in Richmond, Virginia, is a major player in the energy sector, involved in electricity generation, transmission, and distribution. With a Zacks Rank of #3 (Hold) and a VGM Score of B, the company shows promise for investors.

The stock has a Momentum Style Score of B, and shares have risen by 8.5% over the past four weeks. Two analysts recently revised their earnings estimates for fiscal 2025 upwards, and the Zacks Consensus Estimate now stands at $3.39 per share. Additionally, the company has consistently exceeded earnings expectations, with an average surprise of +10.9%.

Given its solid Zacks Rank and strong Momentum and VGM Style Scores, Dominion Energy is a stock worth considering for investors looking for a balanced approach to the market.