Investors looking to find stocks with high potential often use systematic methods that combine detailed technical study with basic growth measures. One well-known method is the plan created by Mark Minervini, a two-time U.S. Investing Champion. His system, called the Specific Entry Point Analysis (SEPA), centers on finding stocks that are in strong upward trends and also have improving earnings and sales growth. This two-part goal seeks to identify leaders near the start of their large price gains. An important instrument in this plan is the Minervini Trend Template, a list of technical rules meant to sort for stocks displaying better relative strength and orderly price patterns. To improve the hunt for stocks with high potential, this technical filter can be paired with a fundamental filter for High Growth Momentum (HGM), which finds companies with solid and getting better financial results.
Edison International (NYSE:EIX), the parent company of Southern California Edison, recently appeared from a screening process that uses both the Minervini Trend Template and a High Growth Momentum filter. This pairing indicates the utility stock may have traits interesting to growth-focused investors using a structured, trend-based plan.
Examining the Technical Base: The Minervini Trend Template
The Minervini Trend Template is based on the idea that the largest stock market successes are already in clear uptrends before their most important price movements. It uses a set of firm technical requirements to confirm a stock is in a definite Stage 2 advance. Edison International's present chart position shows a strong match with these main rules:
- Price Above Key Moving Averages: The stock's last price of $72.66 trades well above its rising 50-day ($61.77), 150-day ($57.63), and 200-day ($56.53) simple moving averages (SMAs). This ordered alignment shows continued buying interest across short, medium, and long-term periods.
- Positive Moving Average Trends: Importantly, these moving averages are not just price levels but are also moving upward. The 200-day SMA, a measure for the long-term trend, has increased from 56.44 to 56.53, confirming a positive long-term direction.
- Proximity to Highs: A principle of the Minervini method is to concentrate on strength, not weakness. EIX is trading within 1% of its 52-week high of $73.21, showing it is a market leader, not a follower. Also, its current price is about 52% above its 52-week low, showing a strong recovery trend is already active.
- Superior Relative Strength: The plan stresses owning the top performers. EIX has a ChartMill Relative Strength (CRS) rating of 85.6, meaning it has done better than 86% of all stocks over the past year. Within its Electric Utilities industry, it does better than 91% of similar companies.
This combination of elements creates a view of a stock in a strong, technically sound uptrend, meeting the main filter for a Minervini-style candidate.
Examining the Growth Driver: High Growth Momentum Measures
While a solid chart is necessary, Minervini's SEPA plan notes that the largest successes are nearly always driven by fundamental improvement. The High Growth Momentum screen looks for companies showing this financial improvement. Edison International's recent financial reports show several positive factors:
- Earnings Improvement: The latest quarterly EPS grew 78.1% year-over-year, a large increase from the 55.0% growth in the quarter before. This sequence of rising growth rates is a key sign watched by growth investors.
- Consistent Earnings Surprises: The company has exceeded analyst EPS estimates in three of the last four quarters, with an average beat of 4.8%. This repeated better-than-expected performance can build trust and draw institutional attention.
- Solid Annual Growth: On a full-year basis, EPS grew 33.1%, a notable gain from the low-single-digit growth of the previous years. This rise in annual profit is a fundamental base for a continued uptrend.
- Positive Estimate Revisions: Analysts have raised their earnings estimates for the next fiscal year by 1.1% over the last three months. Upward revisions often come before more price gains as the market includes better expectations.
Combination and Present Market Position
For a user of the Minervini method, EIX shows a situation where improving fundamentals seem to be confirming and supporting a prior technical uptrend. The strong earnings growth in recent quarters gives a fundamental "reason" that matches the stock's rise to new highs and better relative strength. This link between technical and fundamental study is central to the SEPA plan.
A look at the ChartMill Technical Report for EIX gives a combined view. The report gives the stock a perfect Technical Rating of 10 out of 10, noting its strong positive trends across all periods and leader position in its sector. However, it also gives a note of warning for new entries: the Setup Quality rating is presently low (1 out of 10). This shows that after its recent climb, the stock is stretched from any nearby support and is not in a standard pause or "Volatility Contraction Pattern" (VCP). For a Minervini-style trader, this indicates that while EIX meets the criteria as a strong trend candidate, the best low-risk entry point may have already occurred, and waiting for a possible future opportunity could be wise.
You can see the full, detailed study in the ChartMill Technical Report for EIX.
Finding Comparable Opportunities
Edison International shows the kind of candidate that appears when mixing trend and growth filters. Investors curious about using this two-part screen on the wider market can examine the predefined scan.
→ Find more stocks that meet the High Growth Momentum + Trend Template criteria here.
Disclaimer: This article is for informational and educational purposes only. It is not a recommendation to buy or sell any security. The analysis is based on data provided and certain screening methodologies. All investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions. Please read our full disclaimer here.