It doesn't matter if you're a growth, value, income, or momentum-focused investor -- building a successful investment portfolio takes skill, research, and a little bit of luck.
But how do you find the right combination of stocks? Funding your retirement, your kids' college tuition, or your short- and long-term savings goals certainly requires significant returns.
Enter the Zacks Rank.
What is the Zacks Rank?
A unique, proprietary stock-rating model, the Zacks Rank uses earnings estimate revisions, or changes to a company's earnings expectations, to help investors create a winning portfolio.
There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise.
Agreement is the extent to which all brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of analysts revising their estimates higher, the better chance the stock will outperform.
Magnitude is the size of the recent change in the consensus estimate for the current and next fiscal years.
Upside is the difference between the most accurate estimate, which is calculated by Zacks, and the consensus estimate.
Surprise is made up of a company's last few quarters' earnings per share surprises; companies with a positive earnings surprise are more likely to beat expectations in the future.
Each factor is given a raw score, which is recalculated every night and compiled into the Zacks Rank. Utilizing this data, stocks are put into five different groups: Strong Buy, Buy, Hold, Sell, and Strong Sell.
The Power of Institutional Investors
The Zacks Rank also allows individual investors, or retail investors, to benefit from the power of institutional investors.
Institutional investors are responsible for managing the trillions of dollars invested in mutual funds, hedge funds, and investment banks. Research has shown that these investors can and do move the market due to the large amount of money they deal with, and thus, the market tends to move in the same direction as them.
In order to figure out the fair value of a company and its shares, these investors will build valuation models focused on earnings and earnings expectations. Because if you raise estimates for the bottom line, it creates a higher fair value for a company.
Institutional investors then act on these changes in earnings estimates, typically buying stocks with rising estimates and selling those with falling estimates; an increase in earnings estimates can translate into higher stock prices and bigger gains for the investor.
Since it can often take weeks, if not months, for an institutional investor to build a position (given their size), retail investors who get in at the first sign of upward earnings estimate revisions have a distinct advantage over these larger investors, and can benefit from the expected institutional buying that will follow.
Not only can the Zacks Rank help you take advantage of trends in earnings estimate revisions, but it can also provide a way to get into stocks that are highly sought after by professionals.
How to Invest with the Zacks Rank
The Zacks Rank is known for transforming investment portfolios. In fact, a portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 32 years, with an average annual return of +23.81%.
Moreover, stocks with a new #1 (Strong Buy) ranking have some of the biggest profit potential, while those that fell to a #4 (Sell) or #5 (Strong Sell) have some of the worst.
Let's take a look at Veracyte (VCYT), which was added to the Zacks Rank #1 list on October 7, 2025. Headquartered in San Francisco, CA, Veracyte is a global diagnostics company that provides clinicians valuable insights to diagnose and treat cancer. The company has a wide array of advanced genomic tests that leverage deep scientific, clinical and machine learning expertise and other capabilities. Presently, the portfolio includes Afirma (for thyroid cancer), Decipher Prostate (prostate cancer), Prosigna (breast cancer), Envisia (interstitial lung diseases) and Decipher Bladder (bladder cancer), with additional tests in development.
Two analysts revised their earnings estimate upwards in the last 60 days for fiscal 2025. The Zacks Consensus Estimate has increased $0.08 to $1.42 per share. VCYT boasts an average earnings surprise of 242.8%.
Earnings are expected to grow 19.3% for the current fiscal year, while revenue is projected to increase 12.4%.
Additionally, VCYT has climbed higher over the past four weeks, gaining 11%. The S&P 500 is up 4.1% in comparison.
Bottom Line
With a #1 (Strong Buy) ranking, positive trend in earnings estimate revisions, and strong market momentum, Veracyte should be on investors' shortlist.
If you want even more information on the Zacks Ranks, or one of our many other investing strategies, check out the Zacks Education home page.
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Veracyte, Inc. (VCYT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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