Five Below (NASDAQ:FIVE) Combines Strong Growth with Bullish Technical Setup

Combining technical and fundamental analysis can give investors a useful method for finding possible opportunities. This method tries to find companies with good underlying business growth, shown by increasing revenues and earnings, that are also showing positive price momentum and good chart patterns. The aim is to find stocks where the fundamental story matches the technical move, possibly indicating the start of a continued upward trend. Five Below (NASDAQ:FIVE) recently appeared from a screen made to find these opportunities, looking for good growth stocks with positive technical formations.

Good Fundamental Growth Profile

The basis of this strategy depends on finding companies with solid and improving business fundamentals. For a growth stock to be interesting, it must show it can increase its earnings and sales faster than the general market. Five Below’s fundamental report shows it meets this standard, getting a good Growth Rating of 7 out of 10.

• Revenue Growth: The company has shown notable top-line increase, with revenue growing 13.88% over the past year and averaging a yearly growth rate of almost 16% over recent years.
• Earnings Growth: Earnings per share (EPS) have grown by 10.30% in the last year, with an average yearly growth rate above 10%.
• Future Expectations: Importantly, analysts predict an increase in EPS growth to over 30% each year in the coming years, indicating belief in the company's future profitability.

This growth path is a key qualitative condition for a successful growth stock, as it shows the company is operating in a growing target market and successfully following its business plan. While its Valuation Rating is high, which is typical for high-growth companies, its good Health Rating of 7 and acceptable Profitability Rating of 6 indicate a financially stable company able to pay for its continued growth.

Positive Technical Formation

A good fundamental story is most effective when paired with a good technical picture. The technical analysis for Five Below (NASDAQ:FIVE) shows a stock that is now in a good position, getting a high overall technical rating of 9 and a specific setup rating of 8.

• Positive Trends: Both the long-term and short-term trends are positive, with the stock trading well above its important moving averages (20-day, 50-day, 100-day, and 200-day).
• Bull Flag Pattern: The chart is now showing a bull flag pattern, which often appears when a stock stops to consolidate after a strong upward move. This can be a period of rest before a possible continuation of the earlier trend.
• Key Levels: The stock is trading near a defined resistance zone just above the current price. A clear move above this level could be seen as a technical breakout, confirming the strength of the bull flag pattern. Several support zones below the current price give clear levels for handling possible risk.

This technical position fits with the strategy of entering on strength. The mix of a strong uptrend and a consolidation pattern suggests that buyer interest stays high.

Connection with Growth Investing Principles

The criteria used to find Five Below are directly connected to the ideas of growth investing. The focus on fundamental growth metrics makes sure the company has the financial engine to push future share price increase, which is the main goal of growth investors. The need for acceptable profitability and health ratings works as a risk filter, helping to avoid companies that are growing unsustainably without a sound financial base. Finally, the technical breakout pattern gives a possible timing method, aiming to enter when market momentum agrees with the fundamental story. This multi-part method tries to find companies that are not only growing but are also being rewarded for that growth by the market.

An Interesting Mix

Five Below shows a case where good fundamental growth possibilities are being seen in a technically positive chart. The company’s steady revenue increase and predicted earnings acceleration give a solid base, while the bull flag pattern and positive trend lines suggest market participants are acknowledging this strength. For investors using a growth-focused strategy that includes timing parts, this mix of factors makes Five Below a stock worth more study.

Interested in finding more stocks that meet this particular mix of good growth and positive technical formations? You can run the "Strong Growth Stocks with good Technical Setup Ratings" screen yourself to see the current results.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. All investments involve risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.