Why Pegasystems (PEGA) Leads as a Top Long-Term Momentum Stock

Understanding Zacks Premium and Its Benefits for Investors

For both new and experienced investors, the goal of making the most out of the stock market and investing with confidence is a common aspiration. Zacks Premium offers a comprehensive suite of tools and resources to help achieve these goals. The service provides daily updates on the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens. These features empower investors to make informed decisions and build a more confident approach to their investments.

One of the key components of Zacks Premium is the inclusion of Zacks Style Scores. These scores are designed to complement the Zacks Rank by offering additional insights into the performance potential of stocks over the next 30 days. Each stock is evaluated based on three primary investing styles—value, growth, and momentum—and assigned a rating from A to F. The higher the score, the greater the likelihood that the stock will outperform the market.

Breaking Down the Zacks Style Scores

The Zacks Style Scores are divided into four distinct categories, each focusing on different aspects of investment analysis:

Value Score

Value investors prioritize finding stocks that are undervalued relative to their intrinsic worth. The Value Style Score considers financial metrics such as the price-to-earnings (P/E) ratio, price-to-earnings growth (PEG) ratio, price-to-sales ratio, and price-to-cash flow ratio. These indicators help identify companies that are trading below their true value and may offer attractive investment opportunities.

Growth Score

Growth investors focus on companies that demonstrate strong financial health and positive future prospects. The Growth Style Score takes into account projected and historical earnings, sales, and cash flow data to uncover stocks with long-term, sustainable growth potential. This score is particularly useful for investors looking to capitalize on companies with strong fundamentals and promising futures.

Momentum Score

Momentum traders seek to profit from trends in stock prices or earnings outlooks. The Momentum Style Score identifies favorable times to enter positions by analyzing factors such as one-week price changes and monthly percentage changes in earnings estimates. This score is ideal for investors who believe in the adage "the trend is your friend."

VGM Score

For investors who prefer a balanced approach, the VGM Score combines the insights from the Value, Growth, and Momentum Style Scores. This composite score provides a comprehensive evaluation of a stock’s attractiveness based on its combined value, growth, and momentum characteristics. It is an effective tool for identifying companies that offer a well-rounded investment opportunity.

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. Since 1988, stocks ranked #1 (Strong Buy) have delivered an impressive 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 right ones can be challenging.

This is where the Zacks Style Scores come into play. To maximize returns, investors should focus on stocks with a Zacks Rank of #1 or #2 that also have Style Scores of A or B. These combinations provide the highest probability of success. Even for stocks with a Zacks Rank of #3 (Hold), having A or B Style Scores can enhance upside potential.

It's important to note that the Zacks Rank and Style Scores work together to provide a holistic view of a stock's potential. For example, a stock with a Zacks Rank of #4 (Sell) or #5 (Strong Sell) may still have high Style Scores, but it is likely to face declining earnings forecasts and lower share prices.

Stock to Watch: Pegasystems (PEGA)

Pegasystems (PEGA) is an enterprise software company that enables global organizations to transform their operations through AI-powered decision-making and workflow automation. Currently ranked #3 (Hold) on the Zacks Rank, PEGA has a VGM Score of B, indicating a solid overall profile.

Investors interested in momentum strategies should take note of PEGA, which has a Momentum Style Score of A. Over the past four weeks, the stock has risen by 5.9%. Additionally, three analysts have recently revised their earnings estimates upward for fiscal 2025, leading to an increase in the Zacks Consensus Estimate to $1.98 per share. PEGA also boasts an average earnings surprise of +66.7%.

With a strong Zacks Rank and top-tier Momentum and VGM Style Scores, PEGA is a compelling option for investors seeking opportunities in the computer and technology sector.