For investors aiming to achieve notable capital gains, a mixed method of fundamental and technical analysis can be an effective plan. The objective is to find companies with good underlying business expansion, shown by increasing revenues and earnings, that are also near a technical price move upward. This technique tries to match a company's internal financial force with a positive change in market perception, possibly marking the beginning of a new rising price pattern. One stock now displaying this interesting combination is AUTODESK INC (NASDAQ:ADSK).
A Base of Good Fundamental Expansion
The center of this plan depends on locating companies with good and lasting expansion, a trait plainly seen in Autodesk's fundamentals. The company's fundamental analysis report gives it a firm Expansion Rating of 7 out of 10, putting it with the better performers in the software sector. This number is formed on notable past results and hopeful future forecasts.
- Past Force: In the last year, Autodesk has increased its Earnings Per Share (EPS) by 19.2% and its Revenue by 15.6%. The view over more years is even more notable, with a typical yearly EPS increase of 24.8% over recent years.
- Future View: Experts predict this expansion path will persist, with forecast typical yearly EPS increase of 17.5% and revenue increase of 12.2% in the next years. This forward stability is key for expansion investors, as it indicates the company's growth is not a short occurrence but part of a continued pattern.
- Earnings Support Expansion: Significantly, this expansion is very profitable. Autodesk has a high Earnings Rating of 9/10, led by excellent margins. Its Gross Margin of over 90% and Return on Invested Capital (ROIC) of 20.4% are much better than sector averages, showing the company effectively turns sales into profits and creates large value for shareholders.
This fundamental force is exactly what the plan looks for first: a company with the financial engine to maintain and explain a growing stock price over the long term.
Valuation and Financial Condition Background
While expansion is most important, it must be viewed next to valuation and financial soundness. Autodesk's Valuation Rating of 5/10 indicates a mixed view. Its Price-to-Earnings (P/E) ratio is high, which is common for high-expansion software companies, but it is still less expensive than many of its sector competitors. The PEG ratio, which includes expansion, shows a fair valuation considering its earnings growth rate.
The company's Financial Condition Rating is a medium 6/10. The number is lowered by poorer short-term cash ratios (Current and Quick Ratios below 1). Yet, this is partly balanced by good long-term stability numbers, including a sound Altman-Z score and a low Debt-to-Free-Cash-Flow ratio, indicating the company can manage its debts. For expansion investors, the main attention stays on the company's capacity to pay for its growth, which its good cash flow creation supports.
A Technical Position Ready for Change
The second part of the plan requires spotting a positive technical formation, and here Autodesk shows a notable chance. According to its technical analysis report, the stock gets a high Position Rating of 8 out of 10, even while its total technical number is low because of recent flat market action.
The report notes that the stock has been moving in a band between about $280 and $313 over the last month, with price movement tightening. This kind of price pressure often comes before a notable change. A clear barrier area exists just above the present price, beginning near $300.85. A clear move above this barrier level on high trading volume could be seen by chart analysts as a sign that the stock is prepared to try a move up, possibly finishing its flat phase and matching the good fundamental story.
- Main Barrier: A group of barriers sits between $300.85 and $305.56, made by trendlines and moving averages.
- Main Support: An important support area is between $280.39 and $300.57, giving a possible place for a stop-loss order if the move upward does not succeed.
This position is important for the plan because it gives a possible entry method. The aim is to enter a position as the stock's price confirms a change in force, using the breakout level as a signal that matches the good fundamental expansion story.
Summary: Matching Expansion with Force
Autodesk shows the kind of chance this mixed screening approach tries to find. The company has the fundamental signs of a good expansion stock: high earnings, notable past expansion rates, and a firm prediction for continued growth. At the same time, its chart displays a technical position described by flat movement close to a set barrier level, suggesting the market may be preparing for its next price move.
While the wider market patterns are positive, ADSK has been slower lately, trading in the middle of its 52-week band. A successful move above the $300-$305 barrier area could indicate that the stock is starting to follow its own fundamental force and the wider market's momentum.
Find Other Possible Chances This review of Autodesk was created from a screen made to find "Strong Expansion Stocks with good Technical Position Ratings." If you want to examine other companies that now meet this specific mixed set of rules, you can see the complete screen results here.
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Disclaimer: This article is for information only and is not financial advice, a suggestion, or a deal to buy or sell any securities. The review uses data and reports from other sources. Investing has risk, including the chance of losing the original investment. You should do your own study and talk with a qualified financial advisor before making any investment choices.
