Finding promising investment opportunities often requires a multi-faceted approach, combining the forward-looking nature of fundamental analysis with the market-timing insights of technical analysis. One strategy that uses this dual perspective is screening for strong growth stocks that are also showing favorable technical breakout patterns. The goal is to identify companies with sound underlying business health and accelerating earnings, the hallmarks of a growth stock, just as their share prices begin to move from a period of consolidation, potentially signaling the start of a new upward trend. This meeting of strong fundamentals and positive technical action can point to an interesting risk-reward scenario.
EXELIXIS INC (NASDAQ:EXEL) presents a case study for this method. The Alameda, California-based oncology company, known for its flagship cancer therapy cabozantinib, appears to rate well on both the fundamental growth checklist and the technical setup review.
Fundamental Strength: The Growth Engine
A close look at the company's financials shows why it meets the fundamental filter for a strong growth stock. According to ChartMill's detailed fundamental analysis report, EXELIXIS receives an overall fundamental rating of 8 out of 10, with especially high scores in profitability and financial health. For a growth investor, these are critical supports; profitability funds future innovation, and financial health provides stability to endure market cycles.
- High Profitability: The company has notable margins and returns on capital, doing better than most of its biotechnology peers.
- Return on Equity: 31.37%
- Operating Margin: 35.85%
- Profit Margin: 29.63%
- Sound Financial Health: With a clean balance sheet featuring no debt and a strong Altman-Z score of 12.81, the company carries little bankruptcy risk. This financial strength allows it to actively reinvest in its pipeline.
- Firm Growth Trajectory: The growth rating of 7 is backed by strong historical and expected future expansion.
- Past EPS Growth: +44.51% (last year)
- Expected Future EPS Growth: +25.68% (average per year)
This mix is uncommon and appealing: a company that is both growing quickly and producing high-quality profits from that growth, all while keeping a strong balance sheet. It fits well with the qualitative standards for growth investing, such as operating in the large, constantly changing oncology market and keeping a competitive edge with its commercialized products and developing pipeline.
Technical Setup: The Timing Signal
While fundamentals explain the "why," technical analysis can indicate the "when." ChartMill's technical analysis report for EXEL gives a firm setup rating of 8, showing the stock's chart is forming a pattern that often comes before a possible move higher.
The report notes that although the short and long-term trends are currently neutral, the stock has been moving within a set range between approximately $40.54 and $45.77 over the past month. This time of balance often gathers energy for the next directional move. The technical setup finds a clear resistance level near $44.27. A clear move above this level could be seen by technical traders as a sign that buying pressure is exceeding selling pressure, possibly starting a new positive phase.
Also, the review finds a nearby support zone around $42.80 to $43.63, giving a sensible area for a stop-loss order to handle risk. This set level of support below the current price is a key part of the breakout setup, as it allows for a calculated review of the trade's possible downside.
Meeting of Analysis
The investment view for EXELIXIS, based on this combined screen, depends on this meeting. The fundamental report confirms the company has the engine of a strong growth stock: high profitability, clean financials, and a firm growth outlook. At the same time, the technical report suggests the stock is not overbought and is tightening near a resistance level, offering a set entry point if the breakout happens. This combination is the center of the strategy, using fundamentals to check the company's quality and using technicals to look for a good entry point.
Looking for More Opportunities
EXELIXIS shows the kind of opportunity this combined screening method looks to find. For investors interested in finding other stocks that meet similar standards of strong growth fundamentals paired with interesting technical patterns, you can review the predefined "Strong Growth Stock Technical Setups" screen directly. Click here to view the screen and see additional results.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell 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.
