Why Growth Investors Should Consider Meta Platforms (META)

Growth stocks are appealing to a wide range of investors as their potential for above-average financial growth can lead to significant market interest and impressive returns. However, identifying truly great growth stocks can be a challenging task.

One key reason for this difficulty is that growth stocks often come with higher risks and volatility. Investing in a stock where the growth narrative is fading or has already peaked may result in considerable losses.

The Zacks Growth Style Score, part of the broader Zacks Style Scores system, simplifies this process by evaluating a company's genuine growth potential beyond traditional indicators.

Currently, Meta Platforms (META) stands out on the list recommended by this system. With a strong Growth Score and a top Zacks Rank, it presents an attractive option for growth investors.

Research indicates that stocks with excellent growth characteristics tend to outperform the market consistently. Notably, those stocks achieving a Growth Score of A or B combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) have demonstrated even higher returns.

Here are three significant reasons why Meta Platforms is an appealing growth stock at this time.

Earnings Growth

Earnings growth is one of the most critical aspects of a stock. Companies that demonstrate rapid profit growth often capture the attention of investors. Specifically, growth investors typically look for double-digit earnings growth as it signals strong future potential and likely stock price appreciation.

While Meta Platforms has recorded a historical EPS growth rate of 18.2%, focusing on projected growth is essential. This year, the company's earnings per share (EPS) is expected to increase by 52.5%, significantly outperforming the industry average of 30.6%.

Impressive Asset Utilization Ratio

One essential metric often overlooked by investors is the asset utilization ratio, also known as the sales-to-total-assets (S/TA) ratio. This figure helps assess how effectively a company uses its assets to generate revenue.

At present, Meta Platforms boasts an S/TA ratio of 0.67, meaning it achieves $0.67 in sales for every dollar of assets. In comparison, the industry average sits at 0.57, indicating that Meta utilizes its resources more efficiently.

Besides asset efficiency, the growth in sales is another vital factor. Meta Platforms is anticipated to experience a 20.9% sales growth this year, far exceeding the industry average of 6.6%.

Promising Earnings Estimate Revisions

In addition to the previously mentioned metrics, investors should pay attention to trends in earnings estimate revisions. A positive momentum in these revisions can greatly influence short-term stock price movements.

The current earnings estimates for Meta Platforms have been trending upwards, with the Zacks Consensus Estimate reflecting an increase of 0.4% over the last month.

Conclusion

Meta Platforms has earned a Growth Score of B based on various factors, including those discussed above, and holds a Zacks Rank of #2 thanks to some positive earnings estimate revisions.

This robust combination suggests that Meta Platforms is positioned to outperform and represents a compelling choice for growth-focused investors.

Growth, Investors, Earnings