NETFLIX INC (NASDAQ:NFLX): A Strong Growth Stock with Technical Breakout Potential

The strategy of finding strong growth stocks with favorable technical breakout patterns combines fundamental strength with momentum signals, providing a two-part method for potential investment opportunities. Growth stocks typically show above-average earnings and revenue growth compared to their industry peers, while technical breakouts indicate a possible shift in market sentiment, often leading to further price increases. This approach focuses on companies with solid business metrics that are also gaining market attention, reducing dependence on just fundamental or technical analysis.

NETFLIX INC (NASDAQ:NFLX) appears as a candidate matching this strategy, showing both strong growth fundamentals and a consolidating technical pattern that could lead to a breakout.

Fundamental Strength Supports Growth Potential

Netflix’s fundamental profile, as seen in its fundamental analysis report, highlights several important strengths:

• High Growth Metrics: Over the past year, NFLX reported a 46.69% growth in earnings per share (EPS) and a 14.84% increase in revenue. Future estimates suggest ongoing growth, with EPS expected to rise by 20.15% annually.
• Profitability & Efficiency: The company has an impressive operating margin of 29.51%, better than 97% of its entertainment industry peers. Its return on invested capital (ROIC) of 24.32% further shows efficient use of capital.
• Financial Health: With a strong Altman-Z score of 13.28 and manageable debt levels (Debt/Equity of 0.58), Netflix maintains a stable balance sheet, lowering solvency risks.

These metrics match the growth investing principles discussed in our introductory article, where sustainable earnings growth, industry leadership, and financial stability are key for long-term success.

Technical Setup Indicates Consolidation Before Possible Breakout

Netflix’s technical analysis report presents a mixed but promising picture:

• Consolidation Phase: NFLX has been trading between $1,144.71 and $1,289.60 over the past month, staying near the lower end of this range. A resistance zone lies between $1,184.54 and $1,202.80, with a breakout above this level possibly signaling renewed bullish momentum.
• Long-Term Uptrend Continues: Despite short-term weakness, the stock’s long-term trend stays positive, supported by its 85.9% gain over the past year.
• Relative Strength: NFLX performs better than 90% of stocks in its 12-month performance and ranks in the top 17% of its industry over the past three months.

The current setup suggests that a clear move above resistance could attract more buying interest, especially given the stock’s strong fundamentals.

Why This Combination Matters

Growth stocks with technical breakouts often gain from a "confirmation" effect—fundamental strength supports the price movement, while the breakout reflects growing market confidence. Netflix’s case demonstrates this:

• Its industry-leading margins and revenue growth support investor optimism.
• The narrowing price range points to a potential turning point, where a breakout could lead to further gains.

For investors using this strategy, such alignments lessen reliance on speculative momentum alone, as the underlying business quality offers a safety net.

Discover More Growth Stocks with Technical Setups

Netflix is one example of a stock meeting the criteria of strong growth and a promising technical pattern. For more screened results, visit our Strong Growth Stocks with Good Technical Setup Ratings screener.

Disclaimer: This analysis is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.