When searching for stocks that can deliver substantial returns, many investors combine two distinct approaches: fundamental analysis to identify strong growth stories and technical analysis to find the best entry points. The strategy used to surface BlackRock Inc (NYSE:BLK) looks specifically for companies that exhibit strong growth fundamentals—strong earnings and revenue expansion—while simultaneously showing a technical setup that suggests a breakout may be imminent. By filtering for stocks with decent profitability and financial health alongside this technical pattern, the aim is to reduce the risk of buying into a company that is growing unsustainably or is financially fragile. BlackRock’s current profile offers an interesting case study of how this dual-filter approach can work.
Growth Fundamentals
The core of any growth stock thesis is the company’s ability to consistently increase its earnings and revenue. BlackRock demonstrates this clearly. According to its fundamental analysis report, the company earns a ChartMill Growth Rating of 7 out of 10, which is well above average. This is driven by a strong performance in recent financial results:
- Earnings Per Share (EPS) Growth: The most recent year saw EPS rise by 9.41%, a solid performance. Over the past five years, the average annual EPS growth stands at 7.26%.
- Revenue Growth: Even more impressive is the top-line expansion. Revenue grew by 22.35% in the last year, a very strong number, with a five-year average annual growth rate of 8.37%.
- Future Expectations: Looking ahead, analysts expect EPS to grow by 10.45% and revenue by 9.30% per year on average. Importantly, the growth rate for EPS is actually accelerating when compared to the past five years, which is a positive sign often sought by growth investors.
This consistent and accelerating growth validates the first pillar of the screening strategy. A company growing its earnings and revenue at these rates is likely outpacing its industry peers, which is the fundamental premise of growth investing.
Financial Health and Profitability
A high-growth company is only a worthwhile investment if it can sustain that growth without taking on excessive risk. The screen therefore requires decent scores for both financial health and profitability. BlackRock meets these criteria, though not without some nuance.
- Health Rating (6/10): While the company has a strong liquidity position (Current Ratio of 2.13, better than 74% of its industry peers) and a manageable Debt-to-Equity ratio of 0.23, its Altman-Z score of 1.53 is a point of caution. However, this score is still better than 65% of its capital markets peers. The overall financial health is solid, not stellar, meaning the company is not over-leveraged but does carry some balance sheet risk typical of its sector.
- Profitability Rating (5/10): BlackRock’s profitability is average for its industry, but it has notable strengths. Its Gross Margin of 81.58% is among the best in its sector, outperforming 87% of peers. The Return on Equity (9.94%) is also in the better half of the industry. The main drag on the rating comes from declining Profit and Operating Margins in recent years, something to monitor, but current profitability remains adequate for the strategy’s requirements.
This combination of strong growth with decent, albeit not perfect, health and profitability reduces the likelihood of a “growth trap” where a company’s expansion is funded by unsustainable debt or comes at the expense of its long-term viability.
Technical Setup and Breakout Pattern
Even the best growth stock can be a poor investment if bought at the wrong time. This is where the technical analysis comes in. BlackRock’s technical analysis report shows a Setup Rating of 8 out of 10, indicating an interesting short-term entry pattern.
- Trend Analysis: The short-term trend for BLK is positive, while the long-term trend is neutral. This suggests the stock is beginning to gain momentum. The relative strength is currently at 49.4, meaning it is performing in line with the broad market—not yet overbought or lagging.
- Consolidation and Breakout: The stock has been trading within a range, and the current price of $1065.60 is near the upper end of its recent monthly range of $929.25 – $1074.00. The setup summary highlights a specific resistance zone between $1091.80 and $1093.78. A decisive move above this zone would represent a classic breakout from consolidation. The support zone below, at $1051.59 to $1059.91, provides a logical area for a stop-loss order, giving the trade a defined risk-reward profile.
This technical structure is the hallmark of a breakout pattern: a period of sideways trading (consolidation) followed by a potential move to new highs. The fact that the short-term trend is turning positive while the stock sits just below a resistance level makes the current price action particularly interesting for those looking to enter a growth stock on the verge of a technical breakout.
Analyst Views and Valuation
While not the primary driver for this screen, valuation helps frame the risk. BlackRock carries a Valuation Rating of 3 out of 10, indicating it is not cheap. The Price/Earnings ratio of 21.62 is above the industry average of 16.23. However, the PEG Ratio (which accounts for growth) suggests a correct valuation. With expected earnings growth of 14.11% in the coming years, the premium price may be justified. Analysts appear to agree, as the forward earnings multiple is lower than the trailing one, signaling that future growth is expected to make the current price more reasonable.
More Strong Growth Stocks with Technical Setups
The strategy of pairing strong growth fundamentals with a favorable technical setup can uncover many such opportunities. If you want to explore more stocks that meet these criteria, you can review the full results of this screen. Click here to see the most recent list of stocks with strong growth and good technical setup ratings.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. All investments carry risk, including the potential loss of principal. Past performance and screen results are not guarantees of future results. Always conduct your own research and consider consulting with a financial professional before making any investment decisions.