For investors looking to join fundamental growth with timely technical entries, a multi-layered screening method can be very effective. One such process involves selecting for stocks that show firm earnings momentum, good basic technical condition, and a chart formation hinting a possible breakout is close. This method tries to find companies not just expanding at a quickened rate but also set for a possible extension of their upward move, giving a combination of fundamental and technical catalysts.
Somnigroup International Inc (NYSE:SGI) appears from such a screen, offering a profile that might interest growth and momentum-centered investors. The company, recognized for its Tempur-Pedic, Sealy, and Stearns & Foster bedding brands, displays a mix of recovering financial measures and helpful price action.
Fundamental Growth Momentum
The heart of a high-growth momentum method rests in finding quickening business trends. SGI's newest financial information indicates a notable operational improvement, especially in its sales performance.
- Rapid Sales Growth: The company's latest quarter had revenue jump 63.3% measured against the same time last year. This comes after a sequence of quickening quarterly sales growth over the previous year.
- Earnings Rebound: After a time of variation, earnings per share growth has become positive once more, with the last quarter displaying a 15.9% year-over-year rise. Analysts forecast this momentum to persist, with projections for the coming quarter indicating above 20% EPS growth.
- Firm Cash Flow Creation: Possibly one of the most convincing numbers is the 111.4% year-over-year growth in free cash flow. This shows the company's firm profitability is becoming actual cash, allowing choice for investments, debt payment, or shareholder benefits.
- Steady Earnings Surprises: SGI has surpassed earnings per share projections in every one of the past four quarters, with a typical beat of 5.5%. This history of outperforming forecasts can be a good sign for future results and analyst opinion.
These elements add to SGI's High Growth Momentum Rating of 6. This rating combines short-term earnings momentum, quickening, and analyst changes, important features growth investors watch to find a business as its path gets better.
Technical Condition and Trend
A firm fundamental story is ideally matched with supportive price action. According to ChartMill's detailed technical report, SGI shows a good technical profile.
The report gives the stock a Technical Rating of 7, showing a technically sound stock in a verified upward trend. This score is backed by multiple points:
- Both the long-term and short-term trends are scored as positive.
- The stock is priced above its important moving averages (20, 50, 100, and 200-day), which are all increasing, confirming the bullish formation.
- It has shown firm results over the past six months.
A High-Quality Setup Formation
Beyond the positive trend, the chart is now showing what technical traders seek: a pause within the upward trend, giving a possible entry point. This is seen in SGI's Setup Rating of 8.
The technical report states that volatility has gone down while prices have been pausing in a band between about $78 and $94. The stock is now priced near the top of this band. A few technical details improve the setup quality:
- Defined Support and Resistance: A clear support area is present near $89, made by moving averages and trendlines, giving a sensible zone for a protective stop-loss. Immediate resistance is seen near $93.50.
- Lowered Volatility: The pause has happened with less volatility, which frequently comes before a notable price movement.
- Pocket Pivot Signal: The report points out a recent "Pocket Pivot" signal, a volume-based formation that can show accumulation by institutional investors.
This mix hints the stock is halting after a firm rise, building energy for a possible breakout above the $93.50 resistance mark.
Method in Use
This review shows the screening idea: find companies where fundamental momentum (HGM Rating) is matching with a firm technical trend (TA Rating) and a usable chart formation (Setup Rating). The aim is to find cases where getting better business outcomes could work as the catalyst for a price breakout from a technical pause, giving a clear risk/reward situation.
For investors curious in finding other stocks that fit this mix of firm growth momentum and positive technical setups, the screen used to find SGI is ready to use. You can find more possible choices using this High Growth Momentum Breakout Setups screen here.
Disclaimer: This article is for information only and does not form investment advice, a suggestion, or an offer to buy or sell any security. The review is based on given information and should not be the only ground for an investment choice. Investors must do their own complete study, think about their money situation, risk comfort, and talk with a qualified financial advisor before making any investment choices. Trading stocks includes risk, with the possible loss of original investment.
