Zacks Investment Research

Zacks Investment Research

What Zacks Investment Research is

Zacks Investment Research is a U.S. firm that produces independent, data-driven investment research. Founded in 1978, it is best known for its quantitative focus on earnings-per-share (EPS) estimate revisions and for publishing the Zacks Rank—a numerical rating that signals expected stock performance.

Key takeaways

• Zacks emphasizes earnings-estimate revisions as a primary driver of stock price movement.
• Its core product, the Zacks Rank, assigns stocks (and now funds/ETFs) a score from 1 to 5; 1 = Strong Buy, 5 = Strong Sell.
• Rankings are generated by aggregating brokerage research and analyst estimates across thousands of companies.
• Zacks offers tools such as a stock screener and ratings for industries, mutual funds, and ETFs.

How Zacks generates its ratings

Zacks uses a quantitative, rules-based system that relies heavily on EPS-related metrics. Every trading day it aggregates electronic and printed research from many brokerage firms to build consensus estimates and detect changes. The process is mathematical rather than opinion-driven, aiming to identify where analysts are revising earnings forecasts.

The Zacks Rank and its four factors

The Zacks Rank groups securities into five categories based on expected earnings potential. The ranking system evaluates four main factors:
* Agreement — how unanimous analysts are about changes in valuation.
* Magnitude — the size of the latest change in consensus estimates.
* Upside — the difference between Zacks’ calculated expected change and the consensus estimate.
* Surprise — recent occurrences of positive earnings surprises.

According to Zacks, stocks with a #1 (Strong Buy) rank have historically delivered strong average returns versus the market in many periods.

Zacks compared with Morningstar

Both Zacks and Morningstar provide fund and stock research, but their approaches differ:
* Zacks: quantitative, EPS-revision driven analysis and model-based rankings.
* Morningstar: greater emphasis on fundamental, qualitative analysis and proprietary rating formulas based on past performance and other factors.

Both firms offer free and paid products with tiered access.

Products and rankings

• Stock Screener — a paid tool to filter and sort stocks by metrics such as price change, dividends, ROI, Zacks Rank, and EPS revisions.
• Pricing: Zacks Premium Screens are typically included with a premium membership (around $249/year), with higher-priced tiers available (up to several thousand dollars per year).
• Zacks Industry Rank — the average Zacks Rank of companies within an industry; used to gauge industry-wide conditions.
• Zacks Mutual Fund Rank — quarterly ratings for mutual funds (thousands covered), based on the average Zacks Rank of the fund’s holdings and other quantitative factors.
• Zacks ETF Rank — rankings for ETFs based on one-year outlooks using metrics such as expense ratio, momentum, yield, and underlying assets.

Example of Zacks in action

Zacks cites historical cases where earnings-estimate revisions preceded strong price moves. For example, LSB Industries (LSX) was rated Strong Buy in mid-2012; subsequent upward estimate revisions preceded a notable short-term gain, illustrating the model’s emphasis on estimate momentum.

Bottom line

Zacks stands out for a focused, quantitative approach that treats revisions to earnings estimates as a leading indicator of stock performance. Its systematic aggregation of analyst forecasts and model-based rankings can be a useful input for investors who favor data-driven signals, though investors should combine Zacks’ outputs with broader research and portfolio considerations.