SPS Commerce Inc (NASDAQ:SPSC): A Strong Growth Stock in a Bullish Technical Setup

Investors aiming for substantial price gains frequently use a blended method, joining the prospective focus of fundamental review with the timing cues from technical formations. One tactic filters for vigorous growth stocks that are also displaying favorable technical arrangements. The objective is to find firms with sound core business momentum, marked by quickening profits, firm financial standing, and fair prices, that are also moving in a narrow price range, possibly ready for an upward move. This combination indicates a stock could be building force, presenting a chance to join its next phase of expansion. A recent filter using this approach has pointed to SPS Commerce Inc (NASDAQ:SPSC) as a prospect deserving further examination.

Fundamental Strength: The Driver for Expansion

The base idea of this tactic is finding firms with a forceful growth path. Based on its fundamental analysis report, SPSC displays multiple main attributes that match this need. The company's growth measures are especially notable, receiving a ChartMill Growth Rating of 7 out of 10.

• Notable Past Growth: In the last year, SPSC has achieved an Earnings Per Share (EPS) increase of 20.72% and a Revenue increase of 19.28%. The longer-term averages are more pronounced, with EPS rising at 22.07% and Revenue at 17.97% each year.
• Firm Future Projections: Analysts expect this pace to persist, with future EPS growth forecast at 15.51% and Revenue growth at 11.71% annually. Although a slowdown from prior peaks, these rates still depict a firm growth outline within the software sector.
• Financial Standing and Earnings: The company has a firm financial position with no borrowings and an Altman-Z score of 11.05, showing very low failure risk and getting a Health Rating of 7. Its earnings are steady, with an Operating Margin of 14.85% that beats over 81% of its software industry counterparts.

This mix of firm past results, sound future outlook, and a very stable financial base supplies the fundamental "driver" that growth investors look for. It implies the company holds a lasting edge in its area of cloud-based supply chain management services.

Valuation Setting: Expansion at a Fair Cost

A key stage in growth investing is confirming the expected growth is not already completely reflected in the stock price. SPSC's valuation shows a varied but mostly fair view, with a ChartMill Valuation Rating of 6.

• Its Price-to-Earnings (P/E) ratio of 20.77 is priced lower than about 74% of its software industry counterparts, whose average P/E is above 40.
• Important valuation measures like Enterprise Value/EBITDA and Price/Free Cash Flow also show SPSC is priced lower than about 80% and 78% of its industry, in order.
• When accounting for its growth rate, the stock's PEG ratio implies a fair valuation, showing the market is not overly valuing its future growth potential.

This valuation setting is key for the tactic, as it aids in steering clear of highly speculative stocks where all future achievement is already factored into a very high price, allowing minimal benefit for investor gain.

Technical Arrangement: The Possible Trigger

While fundamentals outline the long-term possibility, technical review can aid in spotting a favorable entry moment. This is where the "arrangement" part of the filter becomes important. SPSC's technical analysis report mentions a notable difference: despite a weak total technical rating of 1 because of unfavorable long- and short-term directions, it displays a favorable Setup Rating of 8.

The report notes the stock has been moving in a somewhat broad band between about $77 and $84 over the last month, with recent activity close to the high end of this band. This time of lower movement after a notable drop can sometimes come before a new price move. A defined barrier area is noted just above the present price, beginning at $83.51. For chart analysts, a clear move above this barrier level on high trading volume could indicate a change in momentum, possibly giving an entry point timed with the beginning of a new rising direction. This formation is precisely what the filtering approach looks for, a fundamentally firm stock that is technically "tightening" and could be getting set for its next rise.

A Measured View on Risk

It is necessary to recognize the opposing views. The technical report plainly says the stock is in a negative direction and has performed much worse than both the wider market and its industry over the past year. These are not minor issues. Also, while growth is firm, the future projections show a slowdown from the outstanding rates of the past. Investors must balance the chance of a technical upward move against the fact of its recent weak price performance.

Conclusion

SPS Commerce Inc offers an interesting example for a blended fundamental and technical tactic. It shows the signs of a firm growth company, quickening profits, a sound financial position, and a fair valuation inside a high-growth sector. At the same time, its price movement displays a tightening formation near a set barrier level, implying a possible turning point could be approaching. For investors using this approach, SPSC stands for a stock where the fundamental driver seems solid, and the technical charts are suggesting the market could be starting to acknowledge that worth once more.

This review is based on a particular filtering tactic. You can examine other stocks that fit similar "Strong Growth Stocks with good Technical Setup Ratings" conditions by using the predefined filter on ChartMill.

Disclaimer: This article is for information and learning only and is not investment guidance, a suggestion, or a bid or request to buy or sell any securities. The review shown is based on data and reports thought to be dependable, but its correctness is not assured. Investing in stocks includes risk, including the possible loss of initial investment. You should do your own study and talk with a certified financial consultant before making any investment choices.