A methodical way to find high-potential stocks joins detailed technical study with basic growth measurements. The process used here brings together Mark Minervini's Trend Template, made to find equities in strong uptrends, with a High Growth Momentum (HGM) screen to confirm these securities also show good underlying business growth. This two-part plan aims to identify stocks that are not only technically good but are also backed by improving company results.
Technical Strength: Following the Trend Template
CARDINAL HEALTH INC (NYSE:CAH) shows a positive technical setup that matches the Minervini Trend Template. This template is important because it selects for stocks in a confirmed Stage 2 uptrend, which raises the chance of a continued rise.
The stock's present position meets the main technical points:
- Price Above Key Moving Averages: The present price of $190.77 is well above the rising 50-day ($155.16), 150-day ($152.81), and 200-day ($146.70) simple moving averages. This arrangement confirms agreement across several timeframes, a sign of a good trend.
- Moving Average Arrangement: The 50-day moving average is positioned above both the 150-day and 200-day averages, and the 150-day is above the 200-day. This ordered, rising formation points to steady and increasing buying interest.
- Nearness to Highs: The stock is changing hands within 4% of its 52-week high of $197.67, a main Minervini principle that indicates strong momentum and leadership. Also, it is more than 70% above its 52-week low, showing a strong recovery and growth direction.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 89.74, CAH is doing better than almost 90% of the whole market. Minervini points out that stocks with high relative strength are frequently the market leaders that provide the largest gains.
Fundamental Momentum: The Basis for Growth
In addition to a technically good chart, Cardinal Health displays the fundamental improvement that high-growth investors look for. The HGM score of at least 4 is supported by several main performance measures, which are crucial as they stand for the earnings capacity and sales growth that usually drive continued price gains.
Recent quarterly results emphasize this positive movement:
- Earnings Per Share (EPS) Improvement: The latest quarter displayed a notable year-over-year EPS growth of 35.6%. This shows a clear improvement from the earlier quarters, which grew at 13.0%, 13.0%, and 6.0% in order. This sequence of rising growth rates is a strong sign of better business conditions.
- Steady Earnings Surprises: The company has exceeded EPS estimates in all of the past four quarters, with an average beat of 8.05%. This steady overachievement often results in positive analyst updates and greater institutional attention.
- Good Profit Margins: The most recent quarterly profit margin was 0.40%. Most significantly, the direction is positive when considered against the full fiscal year, where the profit margin increased to 0.70% from 0.38% the year before. Getting better margins indicates operational effectiveness and pricing strength.
- Positive Forward Estimates: Analyst confidence is seen in upward updates, with the EPS estimate for the next year increasing by 2.14% over the past three months. The expected EPS growth for the next quarter is a good 15.8%.
Technical Analysis Summary
The separate technical report from ChartMill gives Cardinal Health a top score of 10 out of 10, labeling both its short-term and long-term trends as positive. The report states the stock is displaying a stable performance and is changing hands close to a new 52-week high on higher volume, which is a good signal. But, the report also gives a low setup score of 2, meaning that while the stock's condition is very good, it might be overstretched in the short term and could gain from a time of pause for a better entry chance. A complete breakdown of the technical study is in the detailed ChartMill technical report for CAH.
Finding Other Opportunities
For investors looking to use this joined plan of Minervini's trend structure and high-growth momentum, new possible choices can be found methodically. You can locate more stocks that meet these strict requirements by checking the High Growth Momentum + Trend Template screen on ChartMill.
Disclaimer: This is not investment advice. The content is meant to be used for information and learning only. It is very important to do your own study and think about your individual money situation before making any investment choices.
