In the search for high-growth investment opportunities, combining strict technical study with fundamental momentum can be a useful method. One way that shows this is the strategy made known by Mark Minervini, which uses a defined Trend Template to find stocks in solid, confirmed uptrends. This technical base is then combined with a study of companies showing very strong fundamental growth in measures like earnings and sales. The aim is to find leading stocks early in their large price advances, where the combination of a strong chart and improving business fundamentals presents a notable risk/reward situation. A filter using these ideas recently found LEXICON PHARMACEUTICALS INC (NASDAQ:LXRX) as a candidate for more study.
A Solid Technical Base: The Minervini Trend Template
The Minervini Trend Template gives a fixed list to confirm a stock is in a definite, long-term uptrend before study. It removes weak or consolidating stocks, concentrating only on those showing clear power. Lexicon Pharmaceuticals now shows a chart that matches these main technical ideas.
- Price Above Important Moving Averages: The stock's last price of $1.70 trades well above its rising 50-day ($1.32), 150-day ($1.24), and 200-day ($1.09) simple moving averages. This ordered placement is a typical sign of a sound Stage 2 advance.
- Moving Average Order: The shorter 50-day moving average is above both the 150-day and 200-day averages, while the 150-day is also above the 200-day. This sequence confirms the trend's force is solid across several time periods.
- Nearness to Highs: A main idea of the strategy is to concentrate on power, not low price. LXRX is now within 25% of its 52-week high of $1.83, trading just 7.1% below that level. At the same time, at $1.70, it sits 507% above its 52-week low of $0.28, showing a strong recovery trend is already in progress.
- Better Relative Strength: Maybe most important is the stock's ChartMill Relative Strength (CRS) of 91.98. This means it has done better than nearly 92% of all stocks in the market over the past year. Minervini notes that real market leaders show high relative strength, as institutional money moves into the top performers first.
This technical view indicates LXRX is not only advancing, but doing so with confidence and leadership compared to the wider market.
The Growth Driver: Strong Fundamental Momentum
While a solid chart puts a stock on the watchlist, very strong fundamental improvement is often the cause for continued, large moves. This is where the High Growth Momentum (HGM) score is used, filtering for companies showing major gains in their financials. Lexicon's recent numbers show a period of significant change.
- Changed Revenue Growth: The company's financial path has shifted greatly. Revenue growth over the trailing twelve months (TTM) is at a very high 1,255%, and sales in the latest quarter grew by 710% year-over-year. This is not a single event; the quarter before saw growth of 1,653%. Such numbers point to a fundamental change, a key factor looked for by growth investors.
- Quickly Getting Better Earnings Path: For earnings, the trend is also notable. EPS growth on a TTM basis is up 75%. More significantly, the sequential gain is clear: earnings grew by 106% in the earlier quarter and 78% in the latest quarter. This sequence of increasing earnings growth is a sign of companies gaining operating efficiency and market acceptance.
- Regularly Exceeding Expectations: The market values positive surprises. LXRX has exceeded analyst EPS estimates in all of the last four quarters, with an average beat of 53.4%. It has also surpassed revenue estimates in three of the last four quarters. This steady overperformance builds trust and can lead to higher future estimates, another positive factor.
- Solid Analyst Trust: Reflecting this better view, analysts have increased their earnings estimates for the next fiscal year by over 13% in the last three months. This upward estimate trend is a main part of momentum investing, as it shows growing professional trust in the company's short-term future.
For investors using a high-growth method, this mix of very high revenue, improving profits, and rising analyst expectations forms the fundamental "driver" that can push a stock upward, especially when it happens in a company with a new product on the market.
The Company Profile: A Commercial-Stage Biotech
Lexicon Pharmaceuticals is a biopharmaceutical company that has recently become a commercial-stage business. Its main work is the sale of INPEFA (sotagliflozin) in the United States for heart and heart failure uses. The company is also moving forward other candidates, including LX9211 for nerve pain. The major revenue growth noted above is directly connected to the early launch and use of INPEFA. This change from a development-stage to a commercial-stage company with a sold product is a key event that often draws growth investment and can change a stock's path, giving a fundamental story that supports the technical advance.
Technical Condition and Present Pattern
ChartMill's own analysis gives a combined view of the stock's technical condition. LXRX gets a high Technical Rating of 9 out of 10, putting it with the market's top performers from a trend view. The report says the stock has been a strong performer, with recent action being positive. The long-term trend is seen as neutral, but the short-term trend is positive, indicating the stock is gaining force.
However, the Setup Quality Rating is now a 2. This is a key difference. The report states that while LXRX has very good technicals, it "does not present a decent entry opportunity at the moment" because prices have moved up recently. It proposes waiting for a pause or decline to a support level for a better risk/reward entry. Important support areas are seen between $1.19-$1.20 and $1.15-$1.16. A full study of the technical analysis can be found here.
Conclusion
Lexicon Pharmaceuticals presents a notable example of a stock that matches both momentum-based technical and fundamental methods. It satisfies the strict needs of the Minervini Trend Template, trading in a solid uptrend with better relative strength. Fundamentally, it shows the very strong, improving growth in revenue and earnings that high-growth investors look for, caused by its change to a commercial-stage company. While the present technical pattern suggests waiting for a better entry point, the basic growth story and technical power make LXRX a stock for growth-focused investors to watch.
Interested in finding more stocks that match this high-growth momentum model? You can use the same filter that found LXRX with this link: High Growth Momentum + Trend Template Screen.
Disclaimer: This article is for informational and educational purposes only. It is not intended as investment advice, nor does it constitute a recommendation to buy, sell, or hold any security. The analysis is based on data provided and should not be the sole basis for an investment decision. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment. Please read our full disclaimer here.
