In the field of growth investing, few methods are as structured and clear as the system supported by Mark Minervini. His approach, called the Specific Entry Point Analysis (SEPA), is a strict mix of technical and fundamental study made to find leading stocks just as they start their largest price gains. The main technical part is the Trend Template, a list that confirms a stock is in a solid, confirmed uptrend. For investors looking for high-growth chances, this technical condition needs to be joined with outstanding and improving fundamental results in earnings and sales. A filtering method that joins Minervini's Trend Template with a High Growth Momentum (HGM) grade gives a structured way to locate stocks that fit both conditions, possibly setting them up for notable gains.
CareTrust REIT Inc (NYSE:CTRE) comes forward as a stock that meets this joined filter, offering a strong example for study using the Minervini method.
Fitting the Minervini Trend Template
The Trend Template is basic to Minervini's method since it sorts for stocks where the chances are better for the buyer by verifying a firm, multi-timeframe uptrend. A stock must meet each condition to be reviewed. Using the given data, CTRE seems to meet the main technical needs:
- Price Above Key Moving Averages: The present price of $40.01 is trading above its rising 50-day ($37.20), 150-day ($35.18), and 200-day ($33.74) simple moving averages. This order is a standard sign of a sound Stage 2 rise.
- Moving Average Order: The 50-day SMA is above both the 150-day and 200-day SMAs, and the 150-day SMA is above the 200-day SMA. This "stacked" order shows continued buying interest across short, medium, and long-term periods.
- Nearness to Highs: CTRE is now within 1.2% of its 52-week high of $40.50, clearly meeting the "within 25%" rule. Also, the stock is about 61% above its 52-week low of $24.79, well past the "30% above" level. This shows firm recovery force and a trend of holding gains.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 87.13, CTRE is doing better than almost 90% of all stocks in the market over the last year. Minervini notes that real market leaders show high relative strength, as it points to institutional buying and group leadership.
This technical view indicates CTRE is not only going up, but doing so with force and steadiness, a requirement for any stock reviewed under the SEPA method.
Meeting High Growth Momentum Standards
While the Trend Template finds the "how," fundamental study finds the "why." For a stock to have large potential, it must be supported by strong earnings and sales growth. The High Growth Momentum grade reviews these factors, and CTRE's latest financial numbers show a time of marked improvement.
- Earnings Growth Improvement: The year-over-year EPS growth is very firm. The latest quarter showed growth of 46.9%, which comes after even larger growth rates of 66.7% and 400% in the two prior quarters. This sequence of high, and in some times quickly improving, quarterly growth is just what growth investors look for.
- Yearly Earnings Growth: This firmness is not only a quarterly event. The full-year EPS growth (TTM) is at 85.4%, following a solid 70.8% growth in the last fiscal year. This shows a continued and getting better trend in profit.
- Firm Sales Growth: Revenue growth has been just as strong, with the last quarter increasing 116.8% year-over-year. The earlier quarters also showed firm double-digit growth (71.2% and 63.3%), meaning top-line growth is driving the bottom-line results.
- Firm and Getting Better Profit: The company's profit margin in the last quarter was a sound 56.4%. While it has changed in recent quarters, the yearly profit margin has gotten much better from 24.5% to 42.1%, showing better business efficiency as the company grows.
This fundamental picture suggests the stock's technical rise is probably backed by real business results, a pairing Minervini calls needed for "superperformance."
Technical Condition and Setup Review
According to the given ChartMill Technical Analysis report, CTRE gets a top Technical Rating of 10/10. The report summary says the stock is a "steady performer" with both its long-term and short-term trends graded as good. It notes CTRE's leading position, stating it does better than 95% of its group in the Diversified REITs industry and is trading at a new 52-week high. The report also finds several clear support areas, with the nearest in the $35.92 - $37.70 range, which can be used for risk planning.
However, the report gives an important note on timing: CTRE's Setup Quality Rating is now a 3. The study states that while the technical condition is very good, recent price action has been "a little bit too volatile to find a nice entry and exit point." It proposes waiting for a time of settling or a move back toward support to find a lower-risk entry, matching Minervini's focus on exact, low-risk entry points instead of following extended moves.
You can review the full, detailed technical report for CTRE here.
Locating Like Chances
CTRE shows the kind of stock that a joined growth and trend filter can find. For investors wanting to use this structured method to locate other possible choices, the filtering method can be copied.
Summary
CareTrust REIT Inc offers a strong example for the Minervini-style growth method. It successfully meets the strict technical filters of the Trend Template, showing a firm, leading uptrend confirmed by moving averages and relative strength. Fundamentally, it shows the signs of high growth momentum, with quickly improving earnings and sales growth giving a believable reason for the price increase. The main warning from a tactical view is its present low setup rating, meaning the best low-risk entry point may have passed for now. For growth investors, CTRE deserves a spot on a watchlist, with attention on possible new entry chances during future periods of settling that match the stock's sound technical and fundamental base.
Disclaimer: This article is for information and learning only. It is not a suggestion to buy or sell any security. The study is based on given data and a particular investment method. All investing has risk, including the chance of loss of original funds. You should do your own study and talk with a qualified financial advisor before making any investment choices.
