NETFLIX INC (NASDAQ:NFLX) Combines Strong Fundamentals with Bullish Technical Setup

Combining technical and fundamental analysis gives investors a strong methodology for finding good opportunities in the stock markets. This method looks for companies with good underlying business health and growth potential, as found through fundamental metrics, that are also showing positive price action patterns on their charts. The aim is to find stocks where better company fundamentals are starting to be seen by the market, which may indicate the beginning of a large upward price movement. This two-part analysis helps to build confidence, as the fundamental story gives the reason for a potential investment, while the technical setup indicates the timing.

NETFLIX INC (NASDAQ:NFLX) is a clear example of a stock that currently fits this strategy. As a leading company in the worldwide streaming entertainment business, Netflix has shown it can consistently increase its subscriber numbers and revenue. The company's recent work on growing its advertising-supported tier and addressing password sharing has been seen as good by the market, adding to a solid fundamental profile that seems to be matching a positive technical pattern.

Fundamental Strength: The Engine for Growth

The fundamental argument for Netflix is strong, as described in its fundamental analysis report. The company gets very high scores for Profitability and Financial Health, which are important foundations for any growth stock. A company with poor financial health or low profitability is much more likely to face difficulties, while a company with a good base can handle challenges and keep investing for future growth.

• High Profitability: Netflix has a Profitability score of 9 out of 10. Important metrics show this strength:

  • Return on Invested Capital (ROIC) of 24.32%, better than 98.75% of similar companies.
  • An Operating Margin of 29.51%, putting it with the best in the entertainment industry.
  • A steady record of positive earnings and operating cash flow for the last five years.

• Good Financial Health: With a Health score of 8 out of 10, the company's balance sheet is sound. The Altman-Z score of 13.55 shows a very small chance of bankruptcy, and its debt is controllable, particularly given its good free cash flow.

• Positive Growth Path: Most critical for a growth stock, Netflix gets a Growth score of 8 out of 10. The company has produced good results and is likely to continue.

  • Earnings Per Share (EPS) increased by 46.69% in the last year.
  • Revenue rose by 14.84% in the last year and is forecast to grow more than 12% each year in the future.

This mix of high profitability, financial soundness, and increasing growth is what the fundamental part of this strategy looks for. It shows a company that is not only increasing quickly but is doing so effectively and from a position of strength.

Technical Setup: The Market's Vote of Confidence

While the fundamentals support the long-term view, the technical picture gives timing hints. As per the technical analysis report, Netflix shows an notable setup even with a medium-term technical score. After good performance over the past year, the stock has been in a period of consolidation.

• Consolidation within an Uptrend: The long-term trend for NFLX is still positive. Lately, the stock has been moving within a specific range, which can be seen as a normal pause after a large gain. This consolidation lets the stock reduce any overbought conditions and form a new base for a potential next move higher.

• Finding Important Levels: The technical analysis points out key support and resistance areas. A major resistance area is found just above the current price, beginning near $1210. A clear move above this resistance level with high volume could be a sign that the consolidation period is finished and a new upward phase in the long-term uptrend is starting.

• Positive Setup Rating: This particular situation, a stock with good fundamentals consolidating near the top of its range below a clear resistance level, is why Netflix gets a high Setup Rating of 8 out of 10. This rating implies that the risk/reward balance for a potential entry is good, if the stock can achieve a technical breakout.

A Cohesive Investment Thesis

The connection between Netflix's fundamental and technical analyses forms a strong story. The company’s excellent profitability and growth metrics support investor interest and give a fundamental cause for the stock to rise. The present technical setup shows that the market is absorbing these good fundamentals and might be getting ready for its next important move. For investors using a growth-at-a-reasonable-price strategy with technical timing, a breakout above the noted resistance level could act as a confirming sign that the market is starting to value the company's solid growth prospects more completely.

This screen is made to find more opportunities similar to Netflix. If you want to look at other stocks that show strong growth fundamentals together with positive technical breakout patterns, you can see the full list of results by using the Strong Growth Stock Technical Setups screen.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy, sell, or hold any security, or an endorsement of any investment strategy. All investments involve risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.