Investors aiming for notable capital gains frequently use a blended method, joining the prospective discipline of fundamental analysis with the timing knowledge of technical analysis. One particular tactic includes filtering for solid growth stocks that are also showing encouraging technical breakout formations. The objective is to find companies with sound basic business condition and speeding earnings, which are also watching their stock prices move past important resistance points, possibly marking the beginning of a new upward price move. This approach tries to match a company's qualitative and quantitative force with favorable market movement.
ALPHABET INC-CL C (NASDAQ:GOOG), the parent company of Google, recently appeared from a filter made to locate precisely this mix. The filter selects for stocks with high fundamental growth scores, good profitability and financial condition, paired with a favorable technical configuration score suggesting a possible breakout.
Fundamental Force: The Motor for Growth
The basic case for Alphabet as a growth stock depends on its outstanding financial fundamentals. According to ChartMill's detailed fundamental analysis report, the company receives a favorable overall rating of 7 out of 10, with high scores in two key areas for growth investors: profitability and financial condition, both scoring a near-perfect 9.
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Profitability Leader: Alphabet shows top-tier efficiency in turning revenue into profit.
- Its Return on Equity (ROE) of 32.12% and Return on Invested Capital (ROIC) of 24.90% put it in the highest group of its Interactive Media & Services industry, showing management is using capital with notable effectiveness.
- Both its Profit Margin (32.23%) and Operating Margin (32.83%) have gotten better in recent years and rank well above industry averages.
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Strong Financial Condition: A score of 9 in this category points to a very secure balance sheet, a key feature for managing economic uncertainty and paying for future growth projects.
- The company has a very small Debt/Equity ratio of 0.06 and an Altman-Z score of 18.56, indicating almost no bankruptcy risk.
- It produces significant free cash flow, with a Debt-to-FCF ratio of only 0.29, meaning it could settle all its debt in a short time using its cash flow.
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Steady and Good Growth: The growth rating of 7 is backed by notable historical and expected expansion.
- Over the last year, Earnings Per Share (EPS) grew 30.37%, while revenue rose 13.42%.
- Looking ahead, analysts project an average yearly EPS growth of 16.87% and revenue growth of 12.67%.
This fundamental picture is key to the growth investing plan. It verifies that Alphabet is not only a well-known name, but a very profitable, financially stable company with a confirmed and anticipated path of earnings increase, the main force of long-term stock price gains.
Technical Movement: The Timing Indicator
While fundamentals explain the "why," technical analysis can assist with the "when." Alphabet's present chart formation gives the matching breakout signal the filter looks for. The stock gets a complete technical rating of 10 from ChartMill, with a configuration rating of 7. The technical analysis report notes several positive factors coming together.
- Favorable Trend Agreement: Both the short-term and long-term trends are clearly positive, with the stock trading well above its important moving averages (20-day, 50-day, 100-day, and 200-day SMAs), which are all in a rising arrangement.
- Market Leadership: Alphabet is displaying good relative strength, doing better than 92% of all stocks over the past year and 88% of its industry group. It is presently trading near its 52-week high.
- Breakout Situation: The report mentions the stock has been trading in a broad range over the past month and is now testing the high side of that range. A clear move above this point could mark a continuation of the existing upward trend. The existence of several support areas at lower prices gives a structure for handling risk on any new position.
The technical breakout formation is important to this blended plan because it tries to find times when market feeling is matching, or speeding up next to, the company's fundamental advancement. It aims to prevent entering during times of sideways movement or decline, instead looking for confirmation of fresh buying interest.
Valuation and Points
No review is finished without examining price. Alphabet's valuation shows a varied image, which is normal for high-quality growth companies. Its Price-to-Earnings (P/E) ratio of 33.89 is higher than the wider S&P 500 average. However, this is mostly similar to its industry group. More significantly, when growth is considered through the PEG ratio, the valuation seems more acceptable, particularly given the company's outstanding profitability. Investors are essentially paying a higher price for a top-level business with steady double-digit growth outlook, a balance frequent in growth investing.
A Subject for Blended Review
Alphabet Inc. offers a notable example for the "solid growth with favorable technical configuration" plan. Its first-class profitability, excellent balance sheet, and consistent growth meet the fundamental requirements needed for lasting long-term gains. At the same time, its forceful price trend, market outperformance, and place near a breakout point give the technical movement that active investors search for to time their position. This combination of good business results and positive price activity makes it a stock deserving of further study by growth-focused investors.
This stock was found using a particular filter that joins technical and fundamental criteria. You can inspect more possible subjects that match this "Strong Growth Stocks with good Technical Setup Ratings" plan by viewing the full filter results here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on data and reports provided by ChartMill, and past performance is not indicative of future results. 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.
