Investors aiming to benefit from accelerating companies often use a two-part method, combining detailed fundamental study with exact technical timing. One such tactic involves looking for solid growth stocks that are also showing encouraging technical breakout formations. The logic is clear: find companies with excellent financial condition and durable, growing profitability, the signs of lasting growth, and then look for good entry points when their stock price movement indicates a possible upward change. This approach tries to join the long-term potential of a sound business with the nearer-term chance shown by market behavior.
Nextracker Inc. Class A (NASDAQ:NXT), a supplier of integrated solar tracker and software solutions, recently appeared from such a screening process. The company’s profile indicates it works directly in a high-growth field, providing important technology for utility-scale and distributed generation solar projects. The initial public offering in early 2023 listed it on the public market, and later results have gained the notice of growth-focused investors.
Fundamental Strength: The Engine for Growth
The basic attraction of NXT is found in its strong fundamental view, which matches the central ideas of growth investing. According to a detailed fundamental analysis report, the company receives an overall score of 7 out of 10, with high marks in important growth and quality areas.
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High Growth Path: The company's growth measures are a main draw. Over the last year, revenue increased by 20.37%, while earnings per share (EPS) rose by a notable 22.25%. More significantly, the average EPS growth over recent years is at a high 32.95%. Future estimates, while slowing from these fast rates, still predict durable yearly growth of 13.43% for revenue and 9.42% for EPS. This steady, high growth is a key screen for the tactic, as it finds companies growing much faster than the market average.
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High Profitability and Financial Condition: Growth is most useful when it is profitable and lasting. NXT does very well here, with a Profitability score of 9/10. Important margins are top in the industry:
- An Operating Margin of 22.21%, doing better than 99% of similar companies in the Electrical Equipment industry.
- A Return on Invested Capital (ROIC) of 23.73%, much higher than its cost of capital and showing efficient use of investor money.
- Adding to this, the company has a good Financial Condition score of 8/10, marked by no remaining debt and strong liquidity measures. This financial strength gives a stable base for continued growth and is a required condition for reducing risk in a growth portfolio.
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Fair Valuation in Perspective: Even with its high growth and profitability, NXT’s valuation is not extreme compared to its industry. With a Price/Earnings ratio of 20.63, it is valued lower than 85% of its industry peers and is close to the wider S&P 500. This mix of solid growth, high profitability, and a fair price forms what many investors look for: a "growth at a reasonable price" (GARP) chance.
Technical Setup: Timing the Momentum
A solid fundamental story becomes more practical when joined with positive price action. The technical analysis report for NXT gives a top score of 10/10, backed by a high Setup Score of 8/10, showing a good pattern for possible entry.
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Strong Trend Agreement: The stock is in a confirmed uptrend across both short-term and long-term periods. This agreement is a positive sign, suggesting continued buying pressure and investor belief.
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Consolidation Near Resistance: Lately, the stock price has been moving within a range, a common action before a possible breakout. It is now trading near the top of this range, with a set resistance area just above present levels (around $99.48 to $100.24). A clear move above this area could indicate the next step up in the trend.
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Supporting Volume Signs: The setup is also helped by a recent "Pocket Pivot" sign, a formation where the stock gains on volume greater than any down volume day in the earlier period. This is often seen as institutional buying, giving base strength to the price action.
This technical position is exactly what the screening tactic looks for: a fundamentally solid stock that is not just rising without order, but is forming itself through consolidation, gathering force for a possible controlled breakout, offering a set level for risk management.
Strategy in Practice: Connecting the Dots
The screening method that found NXT is made to avoid "story stocks" without financial support and to pass by solid companies caught in technical declines. By needing high Growth, Profitability, and Condition scores, the screen makes sure the business itself is doing well. By adding a high Technical and Setup Score, it then filters for those doing well businesses that the market is starting to acknowledge and place for, often before or during a new stage of price gain. NXT shows a case study in this match: its fundamental measures support a growth premium, and its chart suggests the market may be getting ready to give that premium more completely.
Finding Similar Chances
NXT shows the kind of chance this combined study tries to find. For investors wanting to use this method to find other possible candidates, the ready-made screen "Strong Growth Stock Technical Setups" is available to use, which methodically filters for technical breakout patterns in stocks showing solid growth, profitability, and financial condition.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis presented is based on data and reports believed to be reliable, but its accuracy cannot be guaranteed. Investing involves risk, including the potential loss of principal. Always conduct your own due diligence and consider consulting with a qualified financial advisor before making any investment decisions.
