For investors looking to find stocks with high potential for major growth, joining a strict technical system with attention to fundamental momentum can be a strong method. One example is the Mark Minervini method, which combines his specific Trend Template with a focus on firms showing increasing earnings and sales growth. The Trend Template works as a technical filter, confirming a stock is in a clear, strong uptrend by verifying agreement across several moving averages, nearness to 52-week peaks, and better relative performance. Adding a "High Growth Momentum" filter then finds those technically good firms that are also showing the fundamental drive, quickly improving earnings, revenue, and analyst outlook, that usually supports continued, large price gains. This two-part method tries to find leading stocks early in their big climbs.
ARTERIS INC (NASDAQ:AIP) shows a clear example of a stock that now fits this joined technical and fundamental growth view.
Technical Fit with the Minervini Trend Template
A central idea of the Minervini method is to trade along with the strongest trends, not looking for bargains but instead buying strength. The Trend Template gives a strict list to measure this strength, and Arteris seems to satisfy its main technical points:
- Trending Price and Moving Averages: The stock's present price is positioned well above its rising 50-day ($16.18), 150-day ($14.86), and 200-day ($13.52) simple moving averages (SMAs). Importantly, these averages are ordered positively, with the 50-day above the 150-day, and the 150-day above the 200-day. This ordered, rising arrangement is a sign of a stock in a solid Stage 2 climb, showing continued buying interest across all periods.
- Nearness to Highs: Minervini's work indicates that real market leaders often make their largest gains from a position of strength, not from big drops. AIP's price is within 2% of its 52-week peak of $20.66 and is 260% above its 52-week low of $5.64. This shows strong momentum and an absence of overhead supply, which can allow more gains.
- Better Relative Strength: Maybe most key, the stock has a ChartMill Relative Strength (CRS) ranking of 97.06, meaning it has done better than 97% of all stocks over the last year. This outstanding relative performance is a required filter in the Trend Template, as it finds sector and market leaders that institutions are buying.
Fundamental Driver for High Growth Momentum
While the Trend Template makes sure a stock is technically good, the "High Growth Momentum" part of the filter looks for the fundamental cause for that strength. Arteris displays several measures that growth investors focus on:
- Increasing Revenue Growth: The company's top-line growth is solid and increasing. Quarterly year-over-year revenue growth has risen from 13.2% two quarters ago to 30.0% in the latest quarter. This increase is a good sign that business momentum is growing.
- Strong Earnings Path: Even with a negative EPS on a trailing twelve-month basis, the direction is getting better quickly. The latest quarter saw EPS grow 50% year-over-year. Also, analysts have increased their revenue estimates for the next year by almost 10% over the past three months, showing more belief in the company's short-term future.
- Large Free Cash Flow Creation: A notable measure is the 612% year-over-year growth in free cash flow per share. For a growth company, moving toward or greatly growing positive cash flow is an important step that can pay for more new development, lower need for outside funding, and improve shareholder value.
Market Setting and Technical Condition
The stock's technical breakout is happening in a market where the long-term direction for the S&P 500 stays positive. AIP's own long and short-term directions are both rated positive, and it is doing better than 97% of its peers in the Software industry. The recent move to new 52-week peaks confirms the strength shown by its Trend Template fit.
Summary of Technical Analysis
A close look using the ChartMill Technical Report gives AIP a full technical score of 10 out of 10, reflecting its very good trend condition and market leadership. The report states the stock is a steady performer with very good relative strength. However, it also warns that the recent jump with swings has led to a lower setup quality score, meaning the stock might be stretched in the immediate term. For investors using a Minervini-like method, this suggests that while AIP meets the criteria as a strong watchlist choice based on trend and fundamentals, a better low-risk entry might need waiting for a time of settling or a managed decline to a main support point, like the trendline near $15.51.
Finding Like Opportunities
Arteris Inc shows the kind of firm that appears when filtering for both strong technical trends and fundamental growth increase. Investors wanting to find other choices that meet this strict double standard can look at the preset filter: High Growth Momentum + Trend Template.
Disclaimer: This article is for informational and educational purposes only. It is not a recommendation to buy or sell any security. The analysis is based on current data and methodologies, which are subject to change. All investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.