For investors looking to join solid fundamental growth with well-timed technical entry points, a multi-layered screening method can be very useful. One approach is to sort for stocks that show forceful earnings momentum, good technical condition, and a helpful price pattern set for a possible move. In detail, this searches for securities with a high ChartMill High Growth Momentum (HGM) Rating, which measures quickening earnings and sales, together with high Technical (TA) and Setup Ratings, which find stocks in clear uptrends that are forming a tradable range. This combination tries to find high-growth firms at a point of technical preparation.
Fabrinet (NYSE:FN) appears as a candidate matching this particular profile. The optical and electro-mechanical manufacturing services firm has shown the sort of operational momentum that growth investors value.
Fundamental Growth Momentum
Fabrinet’s fundamental view shows a firm in a forceful growth stage, which is seen in its HGM Rating of 6. The rating brings together several important momentum indicators, and Fabrinet’s recent results supply the drive.
- Sales Acceleration: Top-line growth has been both forceful and quickening. The latest quarter had year-over-year sales rise by 35.9%, a notable jump from the 21.6% and 20.8% growth in the two earlier quarters. This step-by-step acceleration is a key sign of positive business momentum.
- Earnings Growth: The earnings picture is similarly strong. EPS growth on a year-over-year basis for the last quarter was 28.7%, following 22.2% growth in the quarter before. Also, analyst confidence is clear, with the average estimate for next year’s EPS moved higher by almost 2.85% over the past three months.
- Forward Estimates: The growth story is projected to persist. Analyst agreement points to a notable 44.8% EPS growth and 38.9% sales growth for the next quarter, indicating the momentum is not slowing.
For the high-growth momentum plan, these points are essential. Quickening sales and earnings, along with positive analyst changes, are signs of firms that can do better as they regularly beat market forecasts.
Technical Strength and Setup Quality
While forceful fundamentals give the "why," technical analysis supplies the "when." Fabrinet’s technical condition is very good, receiving a perfect TA Rating of 10. As stated in the detailed technical report, the stock is in a verified long-term positive trend and does better than 95% of all stocks over the last year. It trades above all main moving averages (20, 50, 100, and 200-day), which are all moving upward, confirming the force and width of the trend.
Maybe more critical for a planned entry, the stock shows a decent Setup Rating of 7. This signals the stock has been settling its recent advances, trading in a range over the past month. These times of lower volatility and sideways movement often come before the next price move. The technical report mentions an important support area between $489.37 and $508.34, made by a mix of trend lines and moving averages, giving a clear technical zone for risk management.
A Merging Opportunity
Fabrinet shows a situation where fundamental momentum and technical condition meet. The firm is producing quickening growth in an important technology field, which has pushed the stock to a top market place (95th percentile for yearly performance). This fundamental force has created a forceful long-term uptrend. At present, the stock is pausing inside that trend, giving a possible setup for investors who use plans like CANSLIM or Minervini, which look for high-growth leaders as they come out of forming patterns.
The mix of a high HGM Rating, a top-level TA Rating, and a helpful Setup Rating sorts for exactly this case: a fundamentally forceful company in a technical situation that may give a clear risk/reward setup.
Interested in finding other stocks that fit these conditions of high growth momentum and technical breakout setups? You can run the live screen yourself here.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis presented is based on data provided and should not be the sole basis for any investment decision. All investing involves risk, including the potential loss of principal. Past performance is not indicative of future results. Always conduct your own due diligence and consider consulting with a qualified financial advisor before making any investment decisions.