For investors aiming to join strict technical discipline with an emphasis on fundamental growth, the method developed by Mark Minervini offers a strong framework. This process, called the Specific Entry Point Analysis (SEPA), methodically finds stocks showing both notable price trends and quickening business results. The aim is to find leaders early in their large price moves by selecting for stocks that are already showing strength, not those that may later show strength. An important first step is Minervini's Trend Template, a group of fixed technical rules that verify a stock is in a continuing uptrend. Next, the search focuses on companies showing high-growth momentum through solid and getting better earnings, sales, and profit margins. This two-part study tries to locate the meeting point of technical strength and fundamental quickening.
A recent filter using this joined "High Growth Momentum + Trend Template" process has found NORTHPOINTE BANCSHARES INC (NYSE:NPB) as a candidate deserving more study.
Checking the Technical Base: The Trend Template
The Minervini Trend Template is made to remove stocks in poor or resting stages, directing attention to those in clear, definite uptrends. For a stock to pass, it must satisfy eight exact rules about moving averages, price location, and relative strength. A check of NPB's present technical state shows it matches this strict template.
- Moving Average Arrangement: The stock's price is now above its rising 50-day, 150-day, and 200-day simple moving averages (SMAs). Importantly, the shorter-term averages are ordered above the longer-term ones, with the 50-day SMA above both the 150-day and 200-day, and the 150-day above the 200-day. This order is a classic sign of a sound, multi-timeframe uptrend where buyers have command.
- Price Compared to 52-Week Range: NPB trades much above the lowest limit of 30% above its 52-week low. Also important, it is trading within 25% of its 52-week high, a main Minervini rule that concentrates on strength instead of low price. Stocks close to highs frequently have the momentum to keep leading.
- Relative Strength: With a ChartMill Relative Strength (CRS) score of 78.29, NPB does better than nearly 80% of the wider market. While Minervini prefers scores above 80 or 90, a score in the high 70s still shows notable outperformance, especially within its industry. This satisfies the template's basic need and indicates the stock is a relative leader.
This technical agreement is important because it answers the "which stock" question. The Trend Template makes sure an investor is only looking at assets that have already shown continuing buying pressure and are in a clear Stage 2 rise, thus avoiding the dangerous task of trying to buy a declining stock.
Checking the Growth Driver: High Growth Momentum
Passing the technical filter is only the initial stage. The "High Growth Momentum" filter tries to find the fundamental reason for the price strength. Minervini's study shows that the largest stock market winners are nearly always backed by strong earnings and sales growth. For NPB, several measures are notable.
- Earnings Growth Quickening: The company's earnings per share (EPS) growth on a trailing twelve-month (TTM) basis is a solid 53.86%. More importantly, this shows a notable quickening when seen over recent years, showing the growth rate is rising, not falling.
- Profit Margin Improvement: A sign of a high-quality growth company is the ability to improve profitability as it gets larger. NPB's profit margin in the latest quarter was 31.28%, which continues a steady upward path from 20.27% three quarters ago and 5.27% three years ago. This getting better efficiency is a strong fundamental support.
- Strong Latest Quarterly Results: The most recent quarter showed a year-over-year EPS growth of over 103%, together with sales growth of about 49%. This large quarterly result can act as the reason that draws institutional interest and pushes the next part of a price rise.
These fundamental traits are essential because they answer the "why." The strong technical trend is probably being driven by this underlying business momentum. The idea states that stocks with this mix, where getting better fundamentals draw new buyers, strengthening the technical trend, are the ones most likely to see continuing, high-momentum rises.
Technical Study Summary
A check of the detailed ChartMill Technical Report for NPB gives a detailed view. The report gives NPB a technical rating of 6 out of 10, noting it as a medium performer in the whole market but with a positive long-term trend and a neutral short-term trend. Importantly, it notes a setup quality rating of 8, showing the stock is now in a resting phase with lower volatility. The report finds clear support and resistance areas, suggesting a possible lower-risk entry point might appear if the stock stays above support and moves past nearby resistance on high volume. This pattern of resting inside an uptrend is exactly the type of "volatility contraction" setup Minervini's method looks to use for entry.
Locating Comparable Chances
NPB shows an example of how the Minervini-inspired structure can find possible candidates. For investors wanting to find other stocks that meet this mix of technical strictness and growth momentum, the filtering process can be repeated.
You can find more possible candidates by using the same "High Growth Momentum + Trend Template" filter used to find NPB. Click here to see the filter and its present results.
Disclaimer: This article is for information and learning only. It is not a suggestion to buy or sell any security. The study is based on data and a particular investment method, but past results do not show future results. Always do your own complete research, think about your personal money situation and risk tolerance, and talk with a qualified financial advisor before making any investment choices. Please read our full disclaimer here.