For investors aiming to profit from companies with increasing business speed, a mixed technical and fundamental method can be a useful instrument. One technique looks for stocks that show firm basic growth in their finances, such as increasing earnings and sales, while also showing positive technical shapes that indicate a possible rise from a time of sideways movement. This plan tries to find chances where better company basics may be close to being seen by the wider market, possibly resulting in notable price gains. A recent search for "Strong Growth Stocks with good Technical Setup Ratings" has found one such possibility: Leonardo DRS Inc (NASDAQ:DRS).
Observing the Basic Growth Driver
Central to this plan is focusing on companies showing firm and lasting growth, a main support for any lasting investment idea. According to the fundamental analysis report for Leonardo DRS, the company gets a firm 7 out of 10 in the Growth group, pointing to firm past and likely coming expansion.
The company’s recent financial results give clear proof of this speed:
- Earnings Per Share (EPS) rose by a notable 26.44% over the last year, with a typical yearly growth rate of 23.42% over recent years.
- Sales rose by 12.27% in the last year, after a time of very firm past growth.
- Looking forward, experts predict EPS to keep growing at a typical rate of 12.13% each year.
This steady growth is important for the plan, as it shows the company is effectively carrying out its business model within its chosen fields, in this case, advanced defense technologies for land, air, sea, space, and cyber areas. A growing top and bottom line gives the basic reason for a rising stock price over time.
Financial Condition and Earnings: Reviewing the Base
While growth is the main force, the plan also needs "acceptable earnings and condition" to make sure the company is on solid ground. Leonardo DRS’s basic report shows a varied but generally okay view in these parts.
The company receives a very good Financial Condition score of 7 out of 10. Main positives include:
- A very firm balance sheet with a low Debt-to-Equity ratio of 0.12, doing better than almost 78% of its aerospace and defense industry friends.
- A very low Debt-to-Free Cash Flow ratio of 1.32, showing the company could pay all its debt in just over a year, a mark of high ability to pay.
- Good cash measures, with a Current Ratio of 2.0, showing no issue meeting near-term duties.
Earnings, scored a 6 out of 10, shows some areas of firmness next to smaller points to watch. The company’s Return on Invested Capital (ROIC) of 9.17% is better than 79% of industry friends, showing good use of money. However, the report states that main edges like Profit, Operating, and Gross Margin have seen drops in recent years, a direction investors will want to watch for steadiness.
The Technical Arrangement: Placing for a Possible Rise
The second part of this investment plan looks at the stock's price movement, looking for technical shapes that indicate a time of sideways movement or bottoming may be ending. The technical analysis report for DRS is especially notable here. While the total technical score is low because of negative short and long-term directions, the report points out an "acceptable arrangement shape" with an Arrangement Score of 8 out of 10.
This clear difference is central to the chance. The stock has been in a clear downtrend, trading near the bottom of its 52-week span. However, the report states that "prices have been moving sideways recently and the price movement has been less." This kind of activity, after a firm move down, can sometimes create a bottom from which a new climb can start.
The technical arrangement finds a clear and important support area between $33.07 and $33.79, made by a mix of average prices and trend lines. Holding above this level could give a stage for the stock to try a move up. The closest notable resistance sits just above the present price, between $33.97 and $34.32. A clear move above this resistance area on high trading volume could signal that the selling force has eased and buyers are entering, possibly matching the technical view with the positive basic growth story.
Value Setting
Given its growth picture, the stock's value is an important point. The basic report gives a Value score of 4 out of 10. On a lone Price-to-Earnings (P/E) basis of 30.87, DRS seems high-priced. However, this must be seen with context:
- Compared to its often high-valued aerospace and defense industry friends, DRS costs less than nearly 74% of them.
- Its value is about even with the wider S&P 500 average.
- The report states that a "higher value may be reasonable as DRS's earnings are predicted to grow" at a double-digit speed, and its PEG ratio, which includes growth, shows a fair value.
Summary
Leonardo DRS shows a situation where notable basic growth and financial steadiness seem to conflict with a low technical chart. The company is providing firm earnings and sales growth, backed by a very solid balance sheet. Technically, the stock is trying to form a bottom after a big drop, with a clear support level and a sideways movement shape that has received a high arrangement score. For investors using a growth-with-arrangement plan, DRS shows a case where positive basic events may finally be seen in the stock price, especially if it can manage a technical rise above nearby resistance.
Want to find more stocks that match this growth-with-arrangement standard? You can do the same search using our stock screener here.
Disclaimer: This article is for information only and does not make financial advice, a suggestion, or a deal or request to buy or sell any securities. The study is based on data and reports from ChartMill, and past results do not show future results. Investors should do their own full research and think about their personal financial situation and risk comfort before making any investment choices.
