COTERRA ENERGY INC (NYSE:CTRA): A Strong Growth Stock with Promising Technical Setup

Combining fundamental and technical analysis can be an effective strategy for finding stocks with solid growth potential while also identifying good entry points. The "Strong Growth Stocks with Good Technical Setup Ratings" screen looks for companies with solid earnings and revenue growth (fundamental strength) along with technical patterns that may indicate potential breakouts. This combined method helps investors locate stocks that not only have strong business performance but also show signs of momentum or consolidation that could lead to price increases.

COTERRA ENERGY INC (NYSE:CTRA) stands out as a notable example under this approach, showing both solid growth fundamentals and a technical setup that may hint at a future move. Below, we explain why CTRA meets these conditions.

Fundamental Strength: Growth and Profitability

Based on the fundamental analysis report, CTRA performs well in key growth and profitability measures:

• Growth Rating (8/10):

  • Revenue increased by 17.10% over the past year, with a five-year annual growth rate of 21.44%.
  • Earnings Per Share (EPS) is projected to grow by 25.70% annually in the coming years, pointing to rising profitability.
  • The company’s PEG ratio (Price/Earnings to Growth) indicates the stock is fairly priced relative to its growth outlook.

• Profitability Rating (7/10):

  • Healthy margins, including a Gross Margin of 82.52% (better than 92% of industry peers) and an Operating Margin of 31.25%.
  • Return on Equity (ROE) of 10.82% and Return on Invested Capital (ROIC) of 7.30% are decent, though slightly below past averages.

• Valuation Rating (8/10):

  • With a P/E ratio of 11.46, CTRA seems undervalued compared to its industry (average P/E of 19.51) and the broader S&P 500 (P/E of 26.41).

These fundamentals match the growth investing principles covered in our introductory article, which focuses on companies with rising earnings and revenue growth.

Technical Setup: Consolidation and Possible Breakout

The technical analysis report points to a mixed but potentially promising setup:

• Setup Rating (8/10):

  • The stock has been trading in a range between $22.95 and $25.52, with recent prices near the middle of this range.
  • Lower volatility and limited overhead resistance suggest a breakout could occur if buying interest rises.
  • Key support sits at $23.75, offering a logical stop-loss level for traders.

• Challenges:

  • The short and long-term trends are still negative, with CTRA lagging 67% of stocks in its sector over the past year.
  • Resistance levels at $25.60 (daily trendline) and $26.06 (weekly trendline) may limit upward movement unless clearly broken.

Despite the weak overall trend, the consolidation phase and high setup rating imply that CTRA could be building a base before its next move.

Why This Combination Matters

Growth stocks with solid technical setups provide a mix of fundamental strength and favorable entry points. CTRA’s undervaluation compared to its growth prospects, along with its current trading pattern, makes it a candidate for investors seeking:

• Fundamental upside from rising earnings and margin strength.
• Technical opportunity from a possible breakout if the stock moves past nearby resistance levels.

For more stocks that fit this "Strong Growth with Good Technical Setup" criteria, check our predefined screen here.

Disclaimer: This analysis is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.