Three Reasons Why Growth Investors Should Consider Meta Platforms (META)

Growth stocks capture the interest of many investors due to their potential for above-average financial growth, often leading to substantial returns. Yet, finding the right growth stock can be challenging.

The primary difficulty lies in the inherent risks and volatility that come with such investments. Investors who misjudge a company's growth potential may face significant losses, particularly if the company's growth narrative is nearing its end.

Thankfully, tools like the Zacks Growth Style Score can assist investors in identifying promising growth stocks. This system evaluates a company's real growth potential beyond traditional metrics.

Currently, Meta Platforms (META) features on the shortlist of stocks recommended by this system, boasting a strong Growth Score along with a high Zacks Rank.

Research shows that stocks with superior growth characteristics tend to consistently outperform the market. Specifically, stocks that achieve either a Growth Score of A or B and a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to yield even stronger returns.

Let’s explore three key reasons why Meta Platforms stands out as a strong growth investment right now.

Earnings Growth

Earnings growth is arguably one of the most crucial aspects for growth investors, as companies that demonstrate significant profit increases often attract investor attention. For growth investors, double-digit earnings growth signals strong future prospects and potential stock price appreciation.

While Meta Platforms has a historical earnings per share (EPS) growth rate of 18.2%, what’s even more impressive is the projected growth rate. This year, the company's EPS is anticipated to surge by 52.5%, significantly exceeding the industry average growth forecast of 30.6%.

Impressive Asset Utilization Ratio

The asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, is a valuable indicator for evaluating growth companies. This metric measures how efficiently a company uses its assets to generate sales.

Currently, Meta Platforms has an S/TA ratio of 0.67, indicating that for every dollar in assets, the company generates $0.67 in sales. This performance is notably better than the industry average of 0.57, showcasing Meta's efficiency in sales generation.

Moreover, sales growth is another vital aspect in evaluating a company’s potential. Meta’s sales are projected to grow by 20.9% this year, compared to the industry average of just 6.6%, further emphasizing its attractive growth profile.

Promising Earnings Estimate Revisions

Investors should also pay attention to trends in earnings estimate revisions. Positive earnings revisions can strongly indicate potential stock price movements, as empirical research suggests a solid correlation between these trends and stock performance.

In recent weeks, current-year earnings estimates for Meta Platforms have been trending upward. In fact, the Zacks Consensus Estimate for the current year has increased by 0.4% over the past month, suggesting growing confidence among analysts regarding the company’s financial prospects.

Bottom Line

Meta Platforms has not only secured a Growth Score of B based on various key metrics, including those discussed above, but it also holds a Zacks Rank of #2, driven by the encouraging earnings estimate revisions.

This mix of strong financial indicators positions Meta Platforms as a likely outperformer and a sound option for growth investors seeking promising opportunities in the stock market.

growth, investors, Meta