Dynatrace Inc (NYSE:DT): A Strong Growth Stock with Breakout Potential

Investors looking for growth opportunities often search for stocks that mix solid fundamentals with positive technical patterns. The "Strong Growth Stocks with Good Technical Setup Ratings" screen finds companies showing steady earnings and revenue growth, good profitability, and stable financials, while also displaying technical setups that could lead to potential breakouts. This method targets stocks with both strong business performance and short-term price momentum. Dynatrace Inc (NYSE:DT) stands out as one such option, with notable growth numbers and a price pattern that may indicate an upcoming rise.

Fundamental Strengths Supporting Growth Potential

Dynatrace’s fundamentals match the requirements for a strong growth stock, as seen in its fundamental analysis report:

• Strong Growth Metrics:

  • Revenue has increased at an average yearly rate of 25.49% in recent years, with the last year showing an 18.74% rise.
  • Earnings per share (EPS) growth is also notable, with a 35.19% compounded annual growth rate (CAGR) and 16.67% year-over-year growth.
  • Future estimates point to ongoing progress, with expected EPS growth of 17.51% and revenue growth of 15.25% per year.

• High Profitability:

  • The company has a Profit Margin of 28.47%, better than 93% of its software industry competitors.
  • Its Gross Margin of 81.15% shows strong pricing control and operational efficiency.
  • Return on Equity (ROE) is 18.45%, reflecting good use of capital.

• Financial Health:

  • Dynatrace has no debt, uncommon for tech growth firms, and a strong Altman-Z score of 7.21, suggesting low bankruptcy risk.
  • While liquidity ratios (Current and Quick Ratios of 1.40) are moderate, its profitability and stability ease concerns.

These numbers highlight Dynatrace’s ability to reinvest in growth while staying financially sound, a key factor for long-term success, as covered in our introduction to growth investing.

Technical Setup Suggests Breakout Potential

The technical analysis report shows a stock stabilizing after a rise, with a "good setup pattern" (Setup Rating of 7/10):

• Stabilization Phase:

  • Dynatrace has moved between $51.14 and $57.55 over the last month, with lower volatility hinting at a possible upcoming move.
  • Key resistance sits at $55.83,$56.65, and a move above this range could signal further upward movement.
  • Support levels at $52.59,$52.91 and $51.38 offer clear points for managing risk.

• Market Context:

  • The stock’s 21% gain over the past year beats many peers, but it trails the S&P 500’s recent highs, leaving space for improvement.
  • Relative strength ranks in the 76th percentile compared to all stocks, showing resilience despite market changes.

This technical picture fits the screen’s aim of spotting growth stocks ready for a breakout, combining strong fundamentals with a chart pattern hinting at momentum.

Why This Combination Matters

Growth investing relies on finding companies with scalable models and growing market share, but timing entry points is just as important. Dynatrace’s fundamentals confirm its growth path, while its technical setup provides a possible entry point before a breakout. As mentioned earlier, successful growth stocks often need both strong business qualities (like market potential) and disciplined numbers (like earnings growth), which Dynatrace displays.

Find More Opportunities

For investors interested in similar growth stocks with technical setups, our Strong Growth Stocks with Good Technical Setup Ratings screen offers more options.

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