The Vita Coco Company (NASDAQ:COCO) Shows Strong Growth and Technical Breakout Potential

Investors looking for companies with both good fundamental growth traits and positive technical patterns often use a combined analysis method. This process finds stocks set for possible price gains by looking for companies showing good revenue and earnings increases, sound financial numbers, and lasting profitability. These fundamental positives are then matched with technical analysis to find stocks that are moving out of stable patterns or showing good momentum, indicating the market is noticing their basic value. This two-part method tries to find chances where a company's operational quality is being supported by its price movement in the market.

The Vita Coco Company Inc (NASDAQ:COCO) presents an interesting case for this method. As a main producer and distributor of coconut water and other branded drinks, the company works in the increasing health-aware consumer market. Its fundamental picture suggests a company in a good growth stage, while its recent stock chart shows a technical price move, making it a stock worth more study.

Fundamental Growth Assessment

The company's fundamental report, available in detail here, shows a firm growth path. For a growth investing plan, the increase of earnings and sales is very important, as it is the main force for long-term stock gains. The Vita Coco Company does well in this area, which is seen in its Growth Rating of 7 out of 10.

• Earnings Per Share (EPS) Growth: The company has shown good earnings increase, with EPS growing 40.89% on average each year over recent years. The past year alone saw a solid 15.05% rise.
• Revenue Expansion: Top-line growth is also notable, with revenue going up by 11.96% in the last year and averaging 12.69% growth each year.
• Future Expectations: Analysts expect this pace to keep going, predicting EPS growth of 20.38% and revenue growth of 11.37% in the next years.

This steady and good growth across past and expected future times is a key part for any growth stock, showing the company's ability to grow its operations and increase its market position well.

Financial Health and Profitability

Beyond just growth, a company's financial base and ability to make profits are needed for keeping that growth going. A poor balance sheet can slow expansion, while low profitability can create doubt about the business model. The Vita Coco Company gets very good scores on financial health with a rating of 9 out of 10 and shows firm profitability with a rating of 7 out of 10.

• Very Good Solvency and Liquidity: The company has no debt, putting its Debt/Equity ratio with the top in its industry. Its Altman-Z score of 15.05 shows a very small chance of financial trouble. Also, a Current Ratio of 3.51 and a Quick Ratio of 2.75 show enough ability to pay short-term bills.
• Good Returns and Margins: The company gets high scores for its efficiency, with a Return on Invested Capital (ROIC) of 17.77%, doing better than over 90% of its industry group. Its Profit Margin of 11.50% is also better than most rivals, and this margin has been getting better over time.

This mix of a very strong balance sheet and improving profitability gives a stable base from which the company can pay for its future growth plans without needing outside money.

Technical Breakout Pattern

While good fundamentals are key, the timing of an investment can be made better by studying the stock's price movement. The technical analysis report for COCO, available here, shows a very positive situation, getting a perfect technical rating of 10 and a setup rating of 7.

• Positive Momentum: Both the short-term and long-term directions for the stock are positive, a very good sign. The stock is now trading near its 52-week high and has done much better than the wider market and 90% of its industry group over the past year.
• Breakout Setup: The analysis points out that the stock is showing a good setup pattern, marked by lower volatility and a stable period recently. With very little price resistance above the current level, the way for more upward movement seems open.

This technical view suggests that the market is starting to see and value the company's fundamental positives, with the price moving out of a stable phase.

Valuation Considerations

It is important to see that high-growth companies often trade at high valuations. COCO is no different, with a Valuation Rating of 2 out of 10. Its Price-to-Earnings (P/E) ratio of 39.92 is higher than the industry and S&P 500 averages. However, this high price must be put in context. The stock's PEG ratio, which changes the P/E for its growth rate, points to a more fair valuation. When a company is growing earnings at over 20% each year and shows very good financial health, the market is often ready to give a higher multiple.

A Combined Perspective

The Vita Coco Company represents an interesting option for investors using a growth-and-breakout method. Its fundamental picture is marked by active sales and earnings growth, supported by a debt-free balance sheet and good profitability. These quality and number-based positives form the center of a promising growth stock. At the same time, the technical analysis confirms this strength, showing a stock in a clear upward direction that is moving out from a time of stability. This coming together of good fundamentals and positive price movement is exactly what the combined screening process tries to find.

For investors wanting to find other companies that match this picture of good growth along with positive technical situations, more study can be done using the set Strong Growth Stock Technical Setups Screen.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. All investments involve risk, including the possible loss of principal. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.