Carvana Co (NYSE:CVNA) Combines High Growth Momentum with Bullish Technical Setup

For investors looking to join solid earnings momentum with positive technical patterns, a multi-layered screening method can be very useful. One approach uses filters for stocks that show firm foundational growth, as judged by ChartMill's High Growth Momentum (HGM) Rating, while also showing technical soundness and a promising price formation. This method tries to find companies that are not only seeing quickening business results but are also placed within an upward price movement and stabilizing in a way that could come before a new upward phase. CARVANA CO (NYSE:CVNA) appears from such a filter, offering a strong example of a stock that fits these strict conditions.

High Growth Momentum Fundamentals

Carvana's foundational profile is a main reason for its attraction to momentum investors. The company's HGM Rating of 7 shows notable firmness across several important growth and momentum measures that the rating assesses. These areas are vital for the method, as they concentrate on near-term earnings momentum, quickening growth, and positive analyst changes, signs of companies possibly starting a period of fast growth.

• Very High Earnings Growth: The most surprising number is the trailing twelve-month (TTM) EPS growth of about 43,700%. While this very high figure is in part from a recovery from very low numbers, it highlights a sharp shift to profitability. More current quarterly information supports continued, strong momentum:
  • EPS growth (Q2Q) for the most recent quarter: 60.94%
  • EPS growth for the quarter before (Q-1): 814.29%
  • EPS growth for two quarters prior (Q-2): 556.52%
• Firm and Quickening Sales: Top-line growth is also notable and shows steadiness. Revenue growth for the last quarter was 54.50%, after 41.94% and 38.26% in the earlier quarters. This sequence of solid, high-double-digit sales growth is a base for lasting expansion.
• Positive Surprises and Revisions: Carvana has exceeded EPS estimates in three of the last four quarters, with an average surprise of 53.73%. Also, analysts have been increasing their estimates, with the average next-year EPS estimate raised by 3.80% over the past three months. These elements add positively to the HGM Rating, showing that business results are surpassing forecasts and the future view is getting better.
• Margin Improvement and Cash Flow: The company's profit margin in the last quarter was 2.67%, showing a capacity to turn high sales growth into net income. Maybe more significantly, free cash flow per share has increased by 215.61% over the past year, pointing to bettering financial condition and operational effectiveness.

Technical Firmness and Formation Quality

While foundational momentum finds the "what" to buy, technical analysis aids with the "when." According to ChartMill's detailed technical report, Carvana is strong here too, having a perfect Technical Rating of 10 and a firm Setup Rating of 7.

• Outstanding Technical Condition (Rating: 10): A perfect score is uncommon and points to superior technical firmness across many time periods. The report states that both the short-term and long-term movements are positive, a very optimistic signal. CVNA is performing better than 96% of all stocks in the market over the past year and is in the higher part of its 52-week range. The stock is priced above all important moving averages (20, 50, 100, and 200-day), which are all in rising arrangements, confirming a firm and set upward movement.
• Promising Formation Pattern (Rating: 7): The Setup Rating measures the quality of a possible entry point. A score of 7 indicates a reasonable stabilization pattern is present. The technical summary states "reduced volatility while prices have been stabilizing in the most recent period," with a decline that "could offer a good chance for an entry." The report finds a clear support area near $433.54, giving a sensible zone for a stop-loss order, while resistance is seen close to $472.74.

Combination of Growth and Technicals

The combination of Carvana's high-growth foundations and its technical position is what makes it a notable choice for this joined method. The strong earnings and sales momentum supply the foundational reason, suggesting the company's stock has a cause to rise. At the same time, the outstanding technical rating confirms that the market is already acknowledging this firmness, as shown by the stock's strong relative performance and maintained upward movement.

The reasonable setup rating is the last part, suggesting the stock is not overly stretched but is instead halting or declining within its bigger upward movement. This stabilization lets momentum investors consider an entry point with a set risk point, matching with orderly trading rules. The method depends on this exact combination: firm growth to push future price gains and a good technical formation to give a positive risk/reward entry.

Locating Comparable Chances

Carvana acts as a leading example of what a filter for high growth momentum joined with technical breakout formations can find. For investors wanting to find other stocks that fit comparable strict conditions of firm HGM, TA, and Setup Ratings, more study can be done using the set High Growth Momentum Breakout Setups Screen.

---

Disclaimer: This article is for information only and is not investment guidance, a suggestion, or an offer to buy or sell any security. The study is based on given data and shows conditions at a particular time. Investing includes risk, including the possible loss of principal. Always do your own study and think about talking with a qualified financial advisor before making any investment choices. Past results are not a guide for future outcomes.