Clearwater Analytics HDS-A (NYSE:CWAN) Shows Strong Growth and Technical Breakout Potential

Clearwater Analytics Holdings, Inc. (NYSE:CWAN) has been identified through a screening method that blends solid fundamental growth indicators with promising technical breakout signals. This strategy focuses on stocks showing increasing revenue and earnings growth, stable profitability, and sound financials, while also displaying technical patterns that hint at possible upward movement. The goal is to find companies set for continued growth while providing good entry points based on price trends.

Fundamental Strengths Supporting Growth Potential

Clearwater Analytics, a company offering cloud-based investment portfolio accounting and analytics software, displays several important growth traits:

• Strong Revenue and Earnings Growth: In the past year, CWAN’s revenue increased by 23.2%, and earnings per share (EPS) rose by 29.7%. Long-term trends are even more impressive, with a 5-year annualized EPS growth rate of 110.9% and revenue growing at 21.9% per year. Analysts expect this trend to continue, predicting 28.6% annual EPS growth and 27.9% revenue growth in the near future.
• High Profitability Metrics: The company has a 90.1% profit margin, surpassing nearly 99% of its software industry competitors. Its return on equity (ROE) of 38.5% and return on assets (ROA) of 33.4% further demonstrate effective use of capital.
• Solid Balance Sheet: CWAN holds a strong liquidity position, with a current ratio of 5.09 and very little debt (Debt/Equity of 0.04). Its Altman-Z score of 22.4 suggests minimal bankruptcy risk, placing it in the top 94% of the industry.

Although the P/E ratio (44.4) is relatively high, CWAN’s valuation seems reasonable considering its growth path, especially when factoring in its PEG ratio, which adjusts for expected earnings growth. The company’s fundamentals match the growth investing principles detailed in our introduction to growth investing, where rapid growth, scalability, and strong margins are essential.

For a closer look at CWAN’s financial health, see the full fundamental analysis report here.

Technical Setup Indicates a Possible Breakout

While CWAN’s long-term trend is still downward, recent price movements suggest a potential turnaround or consolidation breakout:

• Support Level: The stock has formed a critical support range between $21.12 and $21.27, marked by multiple trendlines on daily and weekly charts. Staying above this level could indicate stability.
• Lower Volatility: CWAN has traded in a narrow range ($20.97–$22.92) over the last month, with volatility decreasing—a typical sign before a directional shift.
• Setup Rating: ChartMill gives CWAN a setup rating of 8/10, implying the stock is well-positioned for a possible upward move if it surpasses near-term resistance at $22.57.

The technical outlook isn’t without risks—the overall trend is still negative, and CWAN is near the lower end of its 52-week range. However, the mix of strong fundamentals and a promising technical pattern makes it a candidate for investors looking for growth stocks at a potential turning point.

For a thorough technical evaluation, review the technical analysis report.

Why This Combination Matters

The screening approach emphasizes stocks with:

1. Fundamental Growth: Rising revenue and earnings, confirming the company is growing its market presence.
2. Profitability and Financial Stability: High margins and low debt lower downside risk.
3. Technical Readiness: A favorable setup raises the chance of a short-term price increase.

CWAN fits this model, providing a rare combination of strong financial performance and a technical setup that may lead to a rally. Investors sometimes miss such opportunities when broader market trends are weak, but these conditions can offer good entry points for long-term growth investments.

Find More Growth Stocks with Strong Setups

For other stocks that match this strategy, explore the Strong Growth Stocks with Good Technical Setup Ratings screen.

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