Why Synchrony is a Leading Momentum Stock for the Long Term

Understanding the Zacks Premium and Its Role in Smart Investing

Investing in the stock market can be a powerful way to grow wealth, but it requires knowledge, strategy, and confidence. Whether you're a seasoned investor or just starting out, the goal is often the same: to make informed decisions that lead to long-term success. One tool that can help achieve this is Zacks Premium, a research service designed to empower investors with valuable insights and resources.

Zacks Premium offers a comprehensive suite of tools, including daily updates on the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens. These features are essential for identifying high-potential stocks and making well-informed investment choices. In addition, the service includes the Zacks Style Scores, which provide further guidance by evaluating stocks based on key investment methodologies.

What Are the Zacks Style Scores?

The Zacks Style Scores are an integral part of the Zacks Premium offering. Developed alongside the Zacks Rank, these scores serve as complementary indicators that assess stocks based on three widely used investing strategies: value, growth, and momentum. They help investors identify stocks that have the best potential to outperform the market over the next 30 days.

Each stock receives a rating from A to F, similar to a grading system in school. An A rating is the highest, indicating the strongest potential for performance, while an F represents the lowest. The ratings are based on a combination of value, growth, and momentum characteristics, allowing investors to tailor their approach based on their preferences.

Breakdown of the Zacks Style Scores

There are four primary categories within the Zacks Style Scores:

Value Score

For value investors, the focus is on finding undervalued stocks that offer strong fundamentals at attractive prices. The Value Score uses financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow to identify companies trading below their intrinsic value. This helps investors spot opportunities before the broader market recognizes them.

Growth Score

Growth investors prioritize companies with strong future prospects and solid financial health. The Growth Score evaluates factors like earnings, sales, and cash flow to determine which stocks are likely to experience sustainable growth over time. This score is ideal for those looking to invest in companies with high potential for expansion.

Momentum Score

Momentum investors rely on trends, following the idea that "the trend is your friend." The Momentum Score analyzes price movements and changes in earnings estimates to identify favorable entry points for high-momentum stocks. It considers factors such as one-week price changes and monthly percentage changes in earnings forecasts.

VGM Score

The VGM Score combines all three styles—value, growth, and momentum—into a single rating. It provides a holistic view of a stock's performance potential and is particularly useful when used alongside the Zacks Rank. This score helps investors find companies that offer a balanced mix of value, growth, and momentum.

How Style Scores Work with the Zacks Rank

The Zacks Rank is a proprietary stock-rating model that leverages earnings estimate revisions to help investors build successful portfolios. Stocks ranked #1 (Strong Buy) have historically delivered impressive returns, significantly outperforming the S&P 500. However, with hundreds of stocks rated #1 or #2, it can be overwhelming to choose the right ones.

This is where the Zacks Style Scores come into play. 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 #3 (Hold) rank, it should still have A or B scores to maximize upside potential. Conversely, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even with high-style scores, may have a declining earnings outlook and should be approached with caution.

Stock to Watch: Synchrony Financial (SYF)

Synchrony Financial is a leading provider of consumer financial services, offering credit products through a wide range of retailers, merchants, and industry partners. The company specializes in private label credit cards, co-branded cards, promotional financing, and loyalty programs.

Currently ranked #3 (Hold) on the Zacks Rank, SYF has a VGM Score of A. Momentum investors should take note, as the stock has a Momentum Style Score of A and has seen a 1% increase over the past four weeks. Nine analysts have recently raised their earnings estimates for fiscal 2025, and the Zacks Consensus Estimate has increased to $8.19 per share. Additionally, SYF has an average earnings surprise of +17.9%.

With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, Synchrony Financial is a compelling option for investors seeking both stability and growth potential.