The stock selection process used here joins a strict technical system with attention to fundamental growth momentum. This method follows the system of noted trader Mark Minervini, whose SEPA (Specific Entry Point Analysis) plan stresses finding stocks that are in strong, clear uptrends and also supported by improving business fundamentals. The aim is to locate market leaders early in their main price increases by using two filters: first, the Minervini Trend Template to check the stock's technical condition and position in a continued bull market stage, and second, a High Growth Momentum (HGM) rating to confirm the company shows the earnings and sales growth seen in real growth leaders.
The Pennant Group Inc (NASDAQ:PNTG) appears as a candidate that meets both groups of strict conditions. As a company offering home health, hospice, and senior living services, Pennant works in the necessary healthcare field. A closer examination shows a stock with price movement and business direction that match the ideas of high-growth momentum investing inside a set technical form.
A Clear Technical Trend
The Minervini Trend Template is made to remove stocks in poor or consolidating stages, concentrating only on those showing clear institutional buying and force. PNTG at present fits the main technical list, placing it clearly in what Minervini calls a "Stage 2" upward move.
- Price vs. Moving Averages: The stock trades notably above its important long-term moving averages (MAs), with its last price of $33.49 above the rising 50-day ($30.85), 150-day ($27.60), and 200-day ($27.22) SMAs. This order confirms a continued uptrend across several time periods.
- Moving Average Order: The shorter-term averages are above the longer-term ones, a standard sign of positive momentum. The 50-day SMA is above both the 150-day and 200-day SMAs, and the 150-day SMA is above the 200-day SMA.
- Nearness to Highs: PNTG is trading within 5% of its 52-week high of $35.00, meeting the "within 25% of the high" condition. Also, it is over 50% above its 52-week low of $21.73, showing notable momentum is already in place.
- Relative Strength: With a ChartMill Relative Strength (CRS) score of 86.55, PNTG is doing better than about 87% of the whole market. This high relative strength is a key part of the Minervini system, as it finds sector leaders that usually draw continued institutional money.
This combination of technical points indicates PNTG is being bought and not just recovering from lows. The trend is set, which is the necessary first part before looking for a good entry point.
The Basis for Growth: Fundamental Momentum
A strong chart is only part of the account. The Minervini plan looks for the "reason" behind the price move, which is frequently found in improving fundamental results. The High Growth Momentum rating for PNTG, taken from its earnings and sales patterns, gives this background.
- Earnings Improvement: The company displays a history of strong and improving year-over-year earnings per share (EPS) growth. The latest quarter had EPS rise 41.7% compared to the same quarter last year. This comes after earlier quarterly growth rates of 15.4%, 12.5%, and 35.0%. This order of strong, and lately improving, profit expansion is just what growth investors look for.
- Sales Growth Maintained: Revenue growth gives the base for earnings. PNTG has recorded notable year-over-year revenue growth in recent quarters: 53.2% in the last quarter, before that 26.8%, 30.1%, and 33.7%. This steady double-digit sales growth points to strong demand and growing operations.
- Growing Profitability: Beyond just increasing sales, the company is becoming more effective. The profit margin in the last reported quarter was 2.66%, and it has shown a general pattern of gain over the past several years, moving up from below 1% levels three years ago. Gaining margins on rising sales is a strong mix for earnings growth.
This fundamental picture supports the stock's high relative strength. The market is valuing the company's performance and growth path, a situation that often comes before more price gain as additional investors see the pattern.
Technical Condition and Position
Beyond the basic Trend Template, a close technical study gives view into the stock's present state and possible risk areas. According to ChartMill's own evaluation, PNTG gets a complete Technical Rating of 10 out of 10, showing very good condition across short and long-term periods. The Setup Rating is a good 7, showing the stock is settling in a fairly narrow range after its recent rise, which can help set a lower-risk entry.
The study finds a clear support area between $32.48 and $33.07, made by a combination of moving averages and trendlines. A clear move above the nearby resistance around $33.63 could show the next part of the uptrend. This organized price movement, with set support and resistance, allows for a careful method to position entry and risk control, a main idea of the overall plan.
For a full review of the support and resistance levels, with the detailed reason behind the ratings, you can see the full technical report for PNTG.
Locating Comparable Chances
The Pennant Group Inc gives an example of a stock fitting both momentum-based technical rules and high-growth fundamental filters. For investors wanting to use this joined screening method to find other possible candidates, the process used to find PNTG can be repeated. You can search the present market for similar positions by using the High Growth Momentum + Trend Template screen on ChartMill.
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 methods described, but past results are not a guide for future results. Always do your own research and think about talking with a qualified financial advisor before making any investment choices. Please read our full disclaimer here.