For investors aiming to benefit from the next set of market leaders, a plan that combines firm business momentum with positive price movement can be especially noteworthy. One such tactic looks for stocks that show firm fundamental expansion, sound financial condition, and earnings, while also displaying a chart formation that hints at a possible upward move. This technique tries to find firms where better business outlooks are starting to gain market notice, possibly marking the beginning of a continued rise. A recent filter using this plan has pointed to ARM Holdings Plc (NASDAQ:ARM) as a candidate for more review.
Fundamental Expansion Driver
This plan first values firms with clear and quickening business expansion, a main force for future stock price gains. ARM’s fundamental picture is supported by a notable Growth Rating of 9 out of 10 from ChartMill, putting it with the best in its field. The firm is not only expanding, the speed of that expansion is rising.
- Past Results: In the last year, ARM has posted strong expansion with Revenue rising by 24.81% and Earnings Per Share (EPS) increasing by 24.44%.
- Future Outlook: The expansion narrative is expected to persist. Experts predict Revenue to rise by an average of 24.28% each year in the next few years, with EPS estimated to rise by 20.00%.
- Quickening Pace: Importantly, the review shows that both revenue and earnings expansion rates are quickening, meaning future outlooks are firmer than recent past results.
This firm expansion is backed by a business framework that produces excellent earnings measures, including a Gross Margin of 97.39%, which tops its industry. The firm’s Profitability Rating is a firm 7. While its Valuation Rating is a low 2, showing a high price-to-earnings ratio, this is common for high-expansion firms where investors pay for future growth. The plan acknowledges that expansion stocks often sell at higher valuations, but looks to validate it with outstanding expansion rates and financial steadiness.
Financial Condition and Steadiness
A firm expansion story can quickly fall apart if a firm’s financial base is weak. So, the filtering method requires good financial condition to ensure the firm can finance its expansion and handle economic shifts. ARM does very well here, having a ChartMill Health Rating of 8. The firm’s balance sheet is a major positive.
- Firm Solvency: ARM has an Altman-Z score of 33.52, showing very little near-term bankruptcy danger and doing better than over 92% of its industry rivals.
- Sound Liquidity: With a Current Ratio and Quick Ratio both at 5.59, the firm keeps enough liquid assets to meet its short-term needs easily, doing better than most rivals.
- Little Debt: A main point is that ARM has no interest-bearing debt, giving great operational freedom and taking away a major danger factor for investors.
This mix of fast expansion and a very strong balance sheet forms a noteworthy fundamental view, which you can examine in the full fundamental analysis report for ARM.
Technical Picture for a Possible Upward Move
The fundamental firmness sets the scene, but the technical review seeks to find the best time for market feeling to match the business results. Despite a low overall Technical Rating of 1, mainly because of its longer-term negative direction and notable weaker performance over the past year, ARM now shows a more positive short-term picture with a Setup Rating of 7.
The technical review indicates the stock has been settling recently, with price swings lessening as it trades inside a set band. This time of balance often comes before a clear move. The picture is marked by a defined support area below the present price (near $105.78) and what the review calls "very little resistance above." This formation suggests that if the stock can gain enough buying force to move past its recent trading band, it could meet fewer barriers on the rise, possibly leading to a notable upward move.
For a picture of these support and resistance points and the present settling pattern, see the complete technical analysis for ARM.
Summary and Plan Logic
ARM Holdings shows an example of the "firm expansion with a technical picture" plan. The firm meets the strict fundamental needs: its expansion is outstanding and quickening, it is highly profitable with a distinct business model, and it is backed by an extremely sound, debt-free balance sheet. These are the trait and number-based signs that hint a firm has the capacity to do better over time.
Technically, the stock seems to be coming out of a time of major drop and settling, forming a base from which a new climb could start. The plan suggests that when a firm with ARM's fundamental merits starts to show signs of technical steadying and a possible upward move pattern, it may offer a chance for investors to place themselves before a wider market re-evaluation happens.
It is key to remember this filter is made to find possible chances, not certainties. The high valuation and recent poor long-term technical direction are clear dangers investors must balance against the expansion potential.
Want to look at other stocks that match this outline of firm expansion combined with a hopeful technical picture? You can use the same filter yourself to find more candidates by going to the Strong Growth Stock Technical Setups Screen.
,
Disclaimer: This article is for informational and educational purposes only and does not form financial, investment, or trading advice. The information given should not be used as the only reason for making any investment choice. You should do your own full research and think about talking with a qualified financial advisor before making any investment choices. Past results are not a guide to future results. Investing has risk, including the possible loss of principal.
