For investors looking to join solid earnings momentum with positive chart patterns, a multi-factor screening method can be a useful instrument. One technique includes selecting for stocks that show high growth traits, as judged by measures like quickening earnings and sales, while also showing sound technical health and a promising price formation. This tactic tries to find companies that are not only getting better fundamentally but are also set for a possible price rise, matching methods used by growth-oriented investors like those observing CANSLIM principles. A recent filter for securities with a ChartMill High Growth Momentum (HGM) Rating over 4, a Technical Rating over 7, and a Setup Rating over 7 found one such example: Alignment Healthcare Inc (NASDAQ:ALHC).
Fundamental Growth Momentum
Alignment Healthcare’s attraction for growth momentum investors is based in its recent financial results, which achieve a 6 out of 10 on the ChartMill High Growth Momentum Rating. This rating combines several important growth and momentum signals.
- Solid Earnings Path: The company has shown major year-over-year earnings per share (EPS) growth. Its TTM EPS growth is at a notable 98.5%, and this momentum is seen in recent quarters with Q2Q EPS growth of 66.7% in the latest period, after even greater growth of 114.3% and 153.8% in the two prior quarters.
- Sound and Steady Revenue Increase: Top-line growth is also strong. Revenue growth over the past TTM year is 46.1%, and this power has been steady, with sales growth over 43% in each of the last three reported quarters.
- Positive Surprises and Cash Flow Increase: Alignment Healthcare has a full record of exceeding EPS estimates over the last four quarters, with an average beat of 112.1%. Also, the company shows a significant 1,802% growth in free cash flow over the past year, a positive sign of getting better financial health and operational effectiveness.
These factors, quickening growth, steady earnings surprises, and large cash flow increase, are exactly the measures the HGM rating is made to find, pointing out companies with fundamental business momentum.
Technical Health and Trend
Apart from the fundamentals, Alignment Healthcare shows a positive technical view. The stock gets a Technical Rating of 7, showing a technically sound profile. According to the detailed technical report, the main positive points include:
- Positive Trend Agreement: Both the short-term and long-term trends for ALHC are scored as positive, a good basic sign for any momentum-focused plan.
- Bullish Pattern Identification: The stock is now seen as showing a bull flag pattern. This pattern usually happens after a solid upward move and shows a short pause, which can often come before a continuation of the earlier trend.
- Market-Relative Placement: While the wider S&P 500 trades near highs, ALHC is trading in the higher part of its own 52-week range. This hints the stock has its own strength and is not only following a general market rise.
A firm technical rating is key for the plan because it helps confirm the stock is in a verified uptrend, raising the chance that positive fundamental news will be seen in the share price.
Quality Formation for Entry
Maybe most important for timing an investment is the formation quality, where ALHC gets a 7. This rating measures if the stock’s present price action gives a clear, lower-risk entry point.
- Pause and Lowered Volatility: The technical report states "lowered volatility while prices have been pausing in the latest period." This creation of a narrow trading range after a rise is a standard trait of a healthy formation, allowing for the setting of clear support and resistance points.
- Clear Support and Resistance: The study finds specific support areas, the closest going from $20.33 to $20.50, made by a mix of moving averages and trendlines. Close overhead resistance is stated at $21.40. This clear framework allows for planned setting of entry and exit points.
- Institutional Activity: The report adds that large players have shown activity in ALHC in recent days, as measured by the Effective Volume indicator. Such action can be a confirming sign of the formation’s possibility.
A high setup rating is the last part of the process, dealing with the "when" to buy. It finds stocks that are not only strong, but are also stopping or pulling back in a controlled way, possibly giving a more favorable risk/reward entry.
Filtering for Like Chances
The mix of growth momentum, technical health, and a quality formation is a strong trio for investors. Alignment Healthcare acts as an example of what this multi-factor filter can find. For investors wanting to find other stocks that meet these exact measures, a High Growth Momentum Rating over 4, a Technical Rating over 7, and a Setup Rating over 7, the filter can be viewed and used daily via this link to the stock screener.
Disclaimer: This article is for information only and does not make up investment advice, a suggestion, or an offer to buy or sell any security. The study is based on given data and should not be the only base for an investment choice. Investors should do their own full research, think about their financial position, risk comfort, and talk with a qualified financial advisor before making any investment choices. Past results are not a guide for future results.