For investors looking to join solid fundamental momentum with positive technical patterns, a layered screening method can be useful. One way is to search for stocks that show a high growth momentum profile, supported by a proprietary rating, while also showing sound technical condition and a positive chart formation. This method tries to find companies that are not just seeing quickening business fundamentals but are also placed in the market to possibly benefit from that momentum from a price view. nVent Electric PLC (NYSE:NVT) appears from such a screen, offering a case study in matching earnings speed with technical breakout possibility.
Fundamental Growth Momentum
The center of the high growth momentum method rests in finding companies with quickening earnings and sales, positive surprises, and good analyst changes. nVent's recent financial results display several of these important traits, adding to its firm High Growth Momentum Rating of 6.
- Quickening Quarterly Growth: The latest quarter shows a large year-over-year EPS growth of 52.5%, a clear increase from the 44.4% growth in the previous quarter. This sequence of rising growth rates is a main sign momentum investors look for.
- Firm Sales Increase: Revenue growth has followed a similar quickening path, with the last quarter rising 41.8% compared to 34.8% in the quarter prior. This top-line force backs the bottom-line increase.
- Steady Estimate Surpasses: The company has exceeded revenue estimates in each of the past four quarters, with an average beat of 3.7%. It has also topped EPS estimates twice in that time. This record of beating expectations builds trust in management's delivery and future plans.
- Positive Analyst Changes: Analyst opinion has moved upward, with the average estimate for next year's earnings adjusted higher by 4.4% over the past three months. Such changes often come before continued positive price momentum as expectations are updated.
While free cash flow has fallen over the past year and profit margins have returned to a typical level from an unusually high quarter a year ago, the main story from recent quarters is one of re-accelerating growth and operational delivery that beats market expectations.
Technical Condition and Formation Quality
A solid fundamental story is most effective when paired with a supportive price chart. According to ChartMill's detailed technical report, nVent does well in this area, having a perfect Technical Rating of 10 and a high Setup Rating of 8.
Technical Condition (Rating: 10): The perfect score shows very good technical condition. The stock is in a confirmed uptrend across both short-term and long-term periods, trading well above its important moving averages (20, 50, 100, and 200-day). Its relative condition is excellent, doing better than 92% of all stocks over the past year. Currently trading near its 52-week high next to a market that is also near highs, NVT's leading position matches wider strength rather than a separate irregularity.
Formation Quality (Rating: 8): This high score signals the stock is pausing in a positive pattern after its earlier rise, possibly preparing for a new breakout. The analysis states that price movement has lessened lately and a clear support area has been formed between about $114.78 and $115.02, which is made by a combination of trendlines and moving averages. For a trader, this gives a reasonable area to set a protective stop-loss order. The nearby resistance area is found between $118.23 and $119.43. A clear move above this resistance could indicate the next step up in the trend.
The mix of these ratings implies NVT is not only a firm stock, but one that is presenting a particular, managed-risk entry point following technical rules. This directly answers the important "when" question for momentum investors, who choose to enter during times of pause within a current uptrend instead of after a steep move.
A Merging Opportunity
nVent Electric shows the kind of opportunity sought by a joined growth-and-technical screen. The fundamental measures show a company performing well with quickening quarterly growth and positive estimate changes, the precise driver that moves momentum investing. At the same time, the technical view supplies the structure, showing a strong uptrend making a normal pause, giving a specific risk point. This merging tries to match the "why" (fundamental quickening) with the "when" (technical formation).
For investors wanting to examine other stocks that fit these particular standards of high growth momentum, firm technicals, and quality formations, the screen used to find NVT is ready for more study.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. 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 decisions. Past performance is not indicative of future results.
