Monday.com Ltd (NASDAQ:MNDY): A Strong Growth Stock with a Constructive Technical Setup

The strategy of combining strong fundamental growth characteristics with promising technical patterns offers investors a systematic approach to identifying potential breakout candidates. This methodology screens for companies demonstrating healthy revenue and earnings expansion while maintaining good financial health and profitability metrics. When these fundamental strengths coincide with constructive price action and technical setups, they can signal potential inflection points where growth momentum may translate into price appreciation. This dual analysis helps filter for companies that not only possess strong business fundamentals but are also positioned favorably from a market timing perspective.

Monday.com Ltd (NASDAQ:MNDY) operates a cloud-based visual work operating system that serves as a connective layer to integrate various digital tools across organizations. The platform provides modular building blocks that enable users to create custom applications and project management software, serving multiple business functions including project management, CRM, and marketing across global markets.

Fundamental Growth Profile

Monday.com demonstrates notable growth characteristics that align with the screening criteria's emphasis on companies with strong expansion potential. The company's revenue growth trajectory has been particularly impressive, with a 30.24% increase over the past year and an average annual growth rate of 65.58% over recent years. This sustained expansion reflects the company's ability to capture market share in the competitive software sector. The growth metrics extend beyond top-line performance, with earnings per share growing by 45.07% in the past year, indicating that the company is successfully translating revenue growth into bottom-line results.

Key growth indicators include:

• Revenue growth (past year): 30.24%
• Average annual revenue growth: 65.58%
• Earnings per share growth: 45.07%
• Expected future EPS growth: 22.71% annually
• Projected revenue growth: 21.32% annually

These growth rates significantly outpace industry averages and support the screening methodology's focus on companies with substantial expansion potential. The company's ability to maintain such growth while transitioning toward profitability supports its operational efficiency and market positioning.

Financial Health and Profitability

The screening criteria prioritize companies with solid financial foundations, and Monday.com's health rating of 8/10 reflects strong balance sheet metrics. The company maintains no outstanding debt, providing financial flexibility and reducing risk during market downturns. Liquidity ratios further support the health assessment, with a current ratio of 2.64 and quick ratio of 2.64, both outperforming approximately 73% of software industry peers. This liquidity position ensures the company can meet short-term obligations while funding continued growth initiatives.

Profitability metrics show ongoing improvement:

• Profit margin: 3.63% (outperforms 65% of industry peers)
• Operating margin: 0.42% (outperforms 60% of industry peers)
• Gross margin: 89.42% (outperforms 96% of industry peers)
• Return on assets: 2.04% (outperforms 64% of industry peers)

While the profitability rating of 5/10 indicates room for improvement, the direction is positive as the company balances growth investments with margin expansion. The exceptional gross margin of nearly 90% provides significant operating leverage as the company scales.

Technical Setup and Price Action

Monday.com presents an interesting technical setup with an 8/10 rating despite a neutral short-term trend. The stock has been consolidating within a defined range between $176.00 and $210.49 over the past month, building a base that could support upward movement. Recent price action shows the stock trading near the middle of this range, with several technical factors suggesting potential for breakout momentum.

Notable technical observations:

• Recent pocket pivot signal indicating accumulation
• Support zones identified at $175.73-$178.07 and $171.45-$172.15
• Resistance levels between $203.28-$204.94
• 20-day and 50-day SMAs showing rising trends
• Trading in lower portion of 52-week range presents recovery potential

The pocket pivot pattern, occurring when price advances on volume exceeding the maximum down volume of the previous ten days, suggests institutional accumulation often preceding significant price movements. This technical pattern aligns with the screening methodology's focus on identifying stocks with both fundamental strength and technical momentum signals.

Valuation Considerations

Monday.com's valuation metrics reflect premium pricing relative to broader market indices, with a P/E ratio of 46.66 compared to the S&P 500 average of 26.13. However, this valuation appears more reasonable within the software industry context, where the average P/E ratio stands at 50.25. The company's Price/Free Cash Flow ratio presents a relative value opportunity, trading cheaper than 70% of industry peers. The forward P/E ratio of 40.01, while elevated compared to the broader market, aligns with industry averages and may be justified by the company's growth trajectory and margin expansion potential.

Investment Considerations

The combination of Monday.com's strong growth profile, improving profitability, good financial health, and constructive technical setup creates an interesting opportunity for investors seeking growth stocks with breakout potential. The company's position in the growing work management software market, combined with its impressive gross margins and debt-free balance sheet, provides fundamental support for continued expansion. The technical consolidation pattern and recent pocket pivot signal suggest growing institutional interest that could catalyze price appreciation should the stock break through resistance levels.

For investors interested in exploring similar opportunities, additional stocks meeting these criteria can be found through the Strong Growth Stocks with Good Technical Setup Ratings screening tool. Readers can access detailed fundamental analysis and technical analysis reports for Monday.com to conduct further due diligence.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results, and all investments carry risk including potential loss of principal.