For investors aiming to achieve notable capital gains, a mixed method using fundamental and technical analysis can be an effective plan. The objective is to find companies with good core business expansion—shown by rising revenues and earnings—that are also near a possible price move upward, as indicated by their stock charts. This technique tries to match a company's internal financial progress with positive market conditions, looking for situations where better fundamentals are starting to be seen by more investors. A recent filter for "Strong Growth Stocks with good Technical Setup Ratings" has identified one example: Leonardo DRS Inc (NASDAQ:DRS).
Fundamental Growth Engine
At its heart, a growth stock needs to show a sound and enlarging business. Leonardo DRS, a supplier of developed defense technologies in sensing, computing, and mission systems, displays interesting fundamental growth traits. The company's financial condition and growth path create a firm base for the growth investment idea.
Recent and Expected Growth:
- Strong Historical Revenue: Over the last few years, DRS has displayed a very good average yearly revenue growth of 135.87%, with a firm 12.27% rise in the latest year.
- Good Earnings Increase: Earnings per share (EPS) growth has been notable, averaging 23.42% each year and recording a 26.44% jump over the past year.
- Positive Future View: Analysts anticipate this progress to persist, with estimated EPS growth of about 12.13% yearly in the next few years.
This steady top and bottom-line growth is important for the plan, as it shows the company is effectively growing its operations and gaining market position in the aerospace and defense industry. While future revenue growth is predicted to slow from its outstanding historical rate, the sustained double-digit EPS growth projection backs the ongoing growth story.
Financial Health and Valuation Context
A good growth narrative must be backed by a steady financial foundation. Leonardo DRS performs well here, with a ChartMill Financial Health Rating of 7 out of 10. The company holds a careful balance sheet with a low Debt/Equity ratio of 0.12, which is superior to almost 80% of its industry group. Its high ability to meet obligations is further emphasized by a very good Debt to Free Cash Flow ratio of 1.32, showing it could settle all its debts fast with present cash flow amounts.
On valuation, the situation is varied but expected for a growth company. While its Price-to-Earnings (P/E) ratio of 37.33 seems high compared to the wider S&P 500, it is actually lower priced than approximately 70% of companies in its own industry. This indicates the market is using a sector-normal premium, which could be reasonable given the company's better growth rates and profit measures compared to many industry peers. Investors are basically paying for higher-than-average growth inside a sector that already holds higher valuations.
Technical Breakout Setup
The fundamental force is given a possible timing indicator by the stock's technical position. According to ChartMill's study, DRS currently offers a hopeful technical setup with a total rating of 8 and a specific Setup Rating of 7.
Main Technical Notes:
- Positive Trend Agreement: Both the near-term and long-term trends for DRS are positive, a strengthening state that hints at continued buying interest across various time frames.
- Stabilization Close to Resistance: The stock has been stabilizing its increases recently, trading in an area just under a set resistance zone between $41.25 and $42.58. This behavior of pausing after a rise can sometimes come before the next step up.
- Bull Flag Formation: The study notes a "bull flag" formation, which usually appears when a stock declines a bit in a controlled way after a sharp upward movement. This is traditionally seen as a time of pause before a possible resumption of the earlier upward trend.
The nearness to resistance, joined with the basic positive trends and clear formation, makes a setting where a clear move above the $42.58 mark could indicate the beginning of a new positive stage. This technical arrangement is exactly what the filtering approach looks for: a fundamentally good growth stock showing price behavior that suggests building force for a possible upward move. You can examine the complete technical view in the detailed technical analysis report for DRS.
Analyst Views and Market Position
Leonardo DRS works in the aerospace and defense industry, a field with constant long-term demand factors linked to global security requirements and technological updating. The company’s concentration on developed sensing, network computing, and electric propulsion fits with main modernization needs within defense spending. While the stock's relative performance has trailed the wider market's recent climb to new peaks, its good yearly results—surpassing 76% of all stocks—highlights its basic momentum. The test and chance exist in the stock moving out of its recent stabilization to return to market leadership.
Conclusion
Leonardo DRS offers a situation where interesting fundamental growth meets a helpful technical setup. The company has a history of energetic revenue and earnings growth, a solid balance sheet, and an acceptable valuation inside its high-growth sector. Technically, the stock is showing the signs of a stabilization period within a longer-term upward trend, preparing for a possible upward move. For investors using a growth-with-momentum tactic, DRS stands as an example where good business results might be close to getting fresh notice in the stock's price behavior.
Interested in finding more opportunities that fit this strategy? You can run the same "Strong Growth Stocks with good Technical Setup Ratings" filter yourself to find other possible examples. Explore the filter and its present results here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investing involves risk, including the potential loss of principal. Always conduct your own thorough research and consider your individual financial situation and risk tolerance before making any investment decisions. The fundamental data referenced can be found in the ChartMill Fundamental Analysis Report for DRS.
