Why EOG Resources (EOG) is a Top Momentum Stock for the Long Term

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JTaking full advantage of the stock market and investing with confidence are common goals for new and old investors, and Zacks Premium offers many different ways to do both.

The popular research service can help you become a smarter, more confident investor, giving you access to daily updates from the Zacks Ranking and Zacks Industry Ranking, Zacks #1 Ranking List, stock research and premium stock screens.

It also includes access to Zacks style sheet music.

What are Zacks style scores?

Zacks Style Scores, developed alongside the Zacks Ranking, are complementary indicators that rate stocks based on three widely followed investment methodologies; they also help investors choose stocks that have the best chance of beating the market over the next 30 days.

Each stock is assigned a rating of A, B, C, D or F based on its value, growth and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, etc. This means that the higher the score, the more likely the stock is to outperform.

Style Scores are divided into four categories:

Value Rating

Value investors love finding good stocks at good prices, especially before the broader market realizes a stock’s true value. Using ratios such as P/E, PEG, Price/Sales, Price/Cash Flow and many other multiples, the Value Style Score identifies the most attractive and discounted stocks.

Growth score

While good value is important, growth-oriented investors focus more on a company’s financial strength and health, as well as its future prospects. The Growth Style Score considers forecasted and historical earnings, sales and cash flow to uncover stocks that will experience sustainable long-term growth.

Momentum Score

Momentum trading is all about taking advantage of upward or downward trends in a stock’s price or earnings outlook, and these investors live by the saying “the trend is your friend.” The Momentum Style Score can identify good times to initiate a position in a security, using factors such as one-week price change and monthly percentage change in earnings estimates.

VGM score

If you enjoy using all three types of investing, the VGM score is for you. It’s a combination of all Style Scores, and it’s an important indicator to use with Zacks Rank. The VGM score rates each stock based on its shared weighted styles, narrowing down the companies with the most attractive value, the best growth forecasts and the most promising momentum.

How Style Scores Work with Zacks Ranking

The Zacks Ranking, which is a proprietary stock rating model, uses revisions to earnings estimates, or changes to a company’s earnings forecast, to help build a winning portfolio.

Investors can count on the success of Zacks Rank, with #1 stocks (Strong Buy) producing an unmatched average annual return of +25.41% since 1988, more than double the performance of the S&P 500. But the model values ​​a large number of stocks, and there are over 200 companies with a strong buy rank, plus another 600 with a #2 (buy) rank, every day.

But it can seem overwhelming to choose the right stocks for you and your investment goals with over 800 top-rated stocks to choose from.

This is where Style Scores come in.

To have the best chance of big returns, you’ll always want to consider stocks with a Zacks #1 or #2 ranking that also have A or B style scores, which will give you the greatest likelihood of success. If you’re looking for stocks with a #3 (Hold) rank, it’s important that they also have A or B scores to ensure the most upside potential.

As mentioned above, the scores are designed to work with the Zacks ranking, so any changes in a company’s earnings outlook should be a deciding factor when deciding which stocks to buy.

Here’s an example: a stock with a #4 (sell) or #5 (strong sell) rating, even one with style scores of A and B, still has a downward earnings outlook, and a higher chance that its price will also decrease.

So the more stocks you have with a rank of #1 or #2 and scores of A or B, the better.

Stock to Watch: EOG Resources (EOG)

Based in Houston, TX, EOG Resources Inc. is primarily involved in the exploration and production of oil and natural gas. The major upstream energy player’s operations are spread across the United States, China and Trinidad. To evaluate wells in prolific oil and gas plays, EOG Resources calculates the rate of return. In other words, the company evaluates the economics of wells to produce optimal volumes of oil and gas while minimizing operating costs.

EOG is #1 (Strong Buy) on the Zacks Ranking, with a VGM score of B.

Aggressive investors should take note of this Oils-Energy stock. EOG has a Momentum Style Score of A, and the shares are up 16.1% over the past four weeks.

10 analysts revised their earnings estimate higher in the past 60 days for fiscal 2022, while Zacks’ consensus estimate rose $2.16 to $12.59 per share. EOG also claims an average earnings surprise of 7.1%.

With a strong Zacks ranking and top Momentum and VGM style scores, EOG should be on the shortlist for investors.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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