The process of identifying stocks with high growth potential often involves a dual focus: pinpointing strong technical trends and confirming solid underlying business momentum. One systematic approach that combines these elements is derived from the methodology of trader Mark Minervini. His strategy emphasizes finding companies already in strong uptrends, as defined by his Trend Template, while also requiring high and improving fundamental growth. This combination aims to capture stocks where better business performance is being recognized and supported by market momentum.
The Ensign Group Inc. (NASDAQ:ENSG) provides a current case study for this screening methodology. The company, a provider of skilled nursing and senior living services, has recently appeared on screens designed to filter for the Minervini Trend Template along with high growth momentum measures. This suggests the stock currently displays characteristics that fit a disciplined growth-and-momentum investment strategy.
Assessing the Technical Trend
The foundation of the initial filter is the Minervini Trend Template, a set of technical conditions designed to ensure a stock is in a confirmed, long-term uptrend. For a stock like ENSG, meeting these conditions is important as it improves the chance of the current momentum continuing. The provided data indicates ENSG meets these key technical points:
- Price vs. Key Averages: The last price of $201.99 sits above the rising 50-day ($198.31), 150-day ($183.88), and 200-day ($175.84) simple moving averages (SMAs). This order shows sustained buying interest across short, intermediate, and long-term timeframes.
- Moving Average Order: The 50-day SMA is above both the 150-day and 200-day SMAs, and the 150-day SMA is above the 200-day SMA. This sequential positive order confirms a strong and organized uptrend.
- Proximity to Highs: The current price is approximately 70% above its 52-week low of $118.73 and trading within roughly 7% of its 52-week high of $218.00. This shows significant upward momentum while still being near peak strength, a sign of market leadership.
- Relative Strength: With a ChartMill Relative Strength (CRS) score of 88.91, ENSG is performing better than nearly 89% of all stocks. High relative strength is a required element of the strategy, identifying stocks that are leaders, not laggards, in the current market environment.
These technical factors together create a picture of a stock in a defined Stage 2 advance, which is the exact phase the Minervini methodology seeks to use.
Evaluating the Growth Momentum
Passing the technical template is only the first step. The "High Growth Momentum" part of the screen seeks to confirm that the price trend is supported by improving business fundamentals. This is important because lasting rallies are often driven by better earnings and sales, not just speculation. ENSG's recent financial measures show this kind of underlying strength:
- Earnings Growth Improvement: The company shows a pattern of improving earnings-per-share (EPS) growth on a year-over-year quarterly basis. The most recent quarter grew 22.1%, following prior quarters of 18.0% and 20.5%. This sequential gain is a key signal of increasing fundamental momentum.
- Consistent Earnings Performance: ENSG has exceeded analyst EPS estimates in three of the last four quarters, with an average beat of over 38%. Positive surprises often lead to increased institutional interest and higher estimates.
- Strong Sales Growth: Revenue growth remains high, with the last quarter showing 20.2% year-over-year growth. Analysts are also becoming more positive, raising their revenue estimates for the next year by over 2% in the last three months.
- Healthy Profitability: The company maintains good profit margins, with the last reported quarter at 7.02%. More importantly, this margin has increased from 6.47% in the prior quarter, indicating better operational efficiency along with top-line growth.
This mix of high and improving EPS, consistent estimate beats, and good revenue growth forms the fundamental support that can maintain a technical breakout and draw further investment.
Technical Health and Setup Summary
Beyond the specific Trend Template filters, a wider look at ENSG's technical health is positive. ChartMill's proprietary Technical Rating for the stock is a high 9 out of 10, indicating very good overall technical strength driven by its long-term positive trend and high relative strength. The Setup Rating is also a good 8, suggesting the stock is currently in a consolidation phase within its uptrend. This pause has lowered volatility and may be forming a possible entry point, with identified support near the $200 level.
For a detailed breakdown of the support and resistance levels, volatility measures, and a specific trade setup analysis, readers can review the full ChartMill Technical Report for ENSG.
A Candidate for Further Analysis
ENSIGN GROUP INC. presents an interesting profile for strategies that mix trend-following with growth investing. It meets the needed technical conditions for being in a sustained uptrend and pairs that with fundamental measures that show improving earnings and sales momentum. While past performance is no guarantee, this alignment is exactly what systematic screens like the 'High Growth Momentum + Trend Template' aim to find.
Interested in finding similar possible candidates? You can run the same screen to see other stocks currently meeting these combined technical and fundamental growth conditions by visiting the High Growth Momentum + Trend Template screen on ChartMill.
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 provided data and a specific screening methodology. Always conduct your own thorough research, consider your financial situation and risk tolerance, and consult with a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results.