In the search for stocks with strong potential, many investors use detailed technical study alongside strict fundamental growth rules. One well-known method using this combined path is the system made famous by Mark Minervini. His process, called Specific Entry Point Analysis (SEPA), tries to locate stocks showing forceful upward moves, supported by quickening earnings and sales increases, shortly before they see major price gains. To use this, investors frequently apply filters that first use Minervini’s Trend Template to verify a stock is in a clear, forceful upward move, and then add tests for strong growth momentum to verify the fundamental cause for the move. This method tries to separate companies that are both technically healthy and fundamentally set for growth.
Lincoln Educational Services Corp. (NASDAQ:LINC) recently appeared from this kind of filtering process, indicating it deserves more study from growth-focused investors using an organized trend-based plan.
A Clear Trend Template Example
The main part of the Minervini plan is the Trend Template, a group of fixed technical rules made to filter for stocks in a clear Stage 2 upward move. Lincoln Educational Services seems to match these important standards, which clarifies its initial filter selection.
- Moving Average Order: The stock’s price is trading notably higher than its important moving averages. With a present price near $40.85, it rests above the rising 50-day ($32.01), 150-day ($25.12), and 200-day ($24.41) simple moving averages (SMAs). Importantly, the 50-day SMA is higher than the 150-day SMA, which is then higher than the 200-day SMA. This ordered arrangement shows a forceful, steady upward move across several time periods.
- Nearness to Highs: A central Minervini idea is to concentrate on strength. LINC is trading within 4% of its 52-week high of $42.415, easily inside the template's rule of being within 25% of the high. At the same time, the stock is about 175% higher than its 52-week low, well beyond the 30% minimum requirement. This shows forceful momentum and a definite recovery from earlier lows.
- Strong Relative Performance: The plan highlights investing in market leaders. LINC has a ChartMill Relative Strength (CRS) score of 97.61, meaning it has done better than almost 98% of all stocks over the last year. This outstanding relative performance is a sign of institutional buying and industry leadership, both important parts of the SEPA method.
These technical points together describe a stock in a forceful, continuing upward move, the precise setting Minervini’s plan aims to use for high-probability returns.
The Fundamental Growth Driver
While a healthy chart is necessary, Minervini notes that the largest gains are driven by fundamental quickening. The "High Growth Momentum" filter used in the screen tries to find this exact trait. Lincoln Educational Services shows several notable growth measures that match this thinking.
- Forceful Earnings Increase: The company’s earnings per share (EPS) increase is notable. Year-over-year EPS growth for the trailing twelve months is over 106%. More revealing is the recent three-month quickening, EPS growth for the last reported quarter jumped 95.5% year-over-year, after a notable 700% growth rate two quarters before. This sequence of major, positive earnings surprises, exceeding analyst forecasts by an average of 240% over the last four quarters, is a typical catalyst that draws the "big money" focus Minervini outlines.
- Strong and Quickening Sales: Sales growth supplies the base for lasting earnings growth. LINC’s revenue growth is strong, with TTM revenue up 17.8%. Recent three-month sales growth has quickened, reported at 19.7% last quarter, up from 13.2% two quarters ago. This direction of quickening top-line growth is a vital sign of business momentum and market need.
- Growing Profitability: Beyond top-line growth, bettering efficiency is important. The company’s profit margin in the last reported quarter was 8.89%, a major increase from 2.69% the prior quarter and 1.33% two quarters earlier. This direction of growing margins implies operational efficiency and pricing strength, further supporting the fundamental argument.
Technical Condition and Setup Points
An examination of the supplied technical study report gives a detailed view. ChartMill gives LINC a top-level Technical Rating of 10 out of 10, confirming the stock’s outstanding technical condition. The report mentions its forceful positive long-term and short-term directions, leadership in its sector, and steady habit of rising prices.
However, the report also gives an important note of care for entry timing. The Setup Quality rating is now a 3, showing that while the direction is forceful, the stock may be stretched in the short term. The report says, "Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first." This matches a key Minervini rule, the importance of a precise, low-risk entry point, often after a volatility contraction pattern (VCP). Investors looking at LINC might need to watch for a constructive pause or consolidation to form a more favorable risk/reward setup.
You can review the full technical study, including support points and detailed analysis, in the ChartMill Technical Report for LINC.
Summary
Lincoln Educational Services offers a notable example of a stock that fits the ideas of growth and momentum investing. It meets the detailed technical requirements of the Minervini Trend Template, showing a definite and forceful upward move with strong relative performance. Fundamentally, it shows the kind of forceful, quickening earnings and sales growth that usually supports lasting stock price increases.
For investors using a plan that joins technical trend-following with fundamental growth filtering, LINC represents the sort of candidate that deserves a spot on a watchlist. The present technical position implies waiting for a clearer entry could be wise, but the basic growth story and technical force are clear.
Interested in locating similar candidates? You can run the "High Growth Momentum + Trend Template" screen yourself to find other stocks that meet these joined rules. Click here to access the screen on ChartMill.
Disclaimer: This article is for information and learning only. It is not meant as investment guidance, a suggestion, or an offer to buy or sell any security. The study is based on given data and certain filtering methods, past results do not show future outcomes. Investors should do their own study and think about their personal financial position and risk comfort before making any investment choices. Please read our full disclaimer here.