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Why Knight-Swift Transportation Holdings (KNX) is a great long-term value stock

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What are Zacks style scores?

Zacks Style Scores are a unique set of guidelines that rate stocks based on three popular investment types and were developed as complementary indicators for the Zacks Ranking. This combination helps investors choose the stocks most likely to beat the market over the next 30 days.

Based on their value, growth and momentum characteristics, each stock is assigned a rating of A, B, C, D or F. The higher the score, the better the chance that the stock will outperform; an A is better than a B, a B is better than a C, etc.

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

Growth-oriented investors are more concerned with a stock’s future prospects, as well as a company’s overall financial health and strength. Thus, the Growth Style Score analyzes characteristics such as expected and historical earnings, sales and cash flow to find stocks that will experience sustainable growth over time.

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

What if you like to use all three types of investment? The VGM Score is a combination of all Style Scores, making it one of the most comprehensive metrics to use with the Zacks Ranking. It rates each stock based on their combined weighted styles, helping to target the companies with the most attractive value, the best growth forecasts and the most promising momentum.

How Style Scores Work with Zacks Ranking

Zacks Rank is a proprietary stock rating model that harnesses the power of earnings estimate revisions, or changes to a company’s earnings forecast, to help investors build a successful portfolio.

It’s been a big hit, with #1 stocks (Strong Buy) producing the highest average annual return of +25.41% since 1988. That’s more than double the S&P 500. But due to the large number of stocks that we assess, there are over 200 companies with a strong Buy Rank, plus another 600 with a #2 (Buy) Rank, on any given day.

That totals over 800 top-rated stocks, and it can be difficult trying to pick the best stocks for you and your portfolio.

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 are considering stocks with a #3 (Hold) rank, it is important that they also have scores of A or B 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.

For example, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one that displays scores of A and B, still has a downside earnings forecast, and a much greater probability than the its share price falls. as well.

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

Stock to watch: Knight-Swift Transportation Holdings (KNX)

Knight-Swift Transportation Holdings Inc. is North America’s largest truckload carrier. The Phoenix, AZ-based company also provides transportation solutions and aims to grow through mergers and acquisitions. It serves customers across North America by providing many efficient and low-cost truckload, intermodal and logistics services.

KNX is a #3 (Hold) on the Zacks rank, with a VGM score of A.

It also boasts a value style score of A thanks to attractive valuation metrics like a forward P/E ratio of 9.45; value investors should take this into account.

Seven analysts raised their earnings estimate in the past 60 days for fiscal 2022. Zacks’ consensus estimate rose $0.03 to $5.27 per share. KNX shows an average earnings surprise of 13.5%.

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

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