For investors looking to combine solid earnings momentum with positive chart patterns, a multi-layered screening method can be very useful. One approach involves selecting stocks that show solid fundamental growth traits, as measured by a High Growth Momentum (HGM) rating, while also showing technical soundness and a favorable price structure. This method tries to find companies not just seeing speeding up business trends but also trading in a way that hints at a possible extension of their upward move, providing a more defined point of entry for investors focused on momentum.
Seagate Technology Holdings (NASDAQ:STX) appears as a candidate from such a screen, scoring a 7 out of 10 on the ChartMill High Growth Momentum Rating. This rating combines short-term earnings momentum, growth speed, and analyst opinion into one score, making it a helpful tool for finding companies in a strong growth period.
Fundamental Growth Momentum
The HGM rating for STX is backed by several solid fundamental metrics that are important for momentum investors who concentrate on earnings speed and positive changes. The company is showing major year-over-year profit growth and maintained operational soundness.
- Earnings Power: The company reported a trailing twelve-month (TTM) EPS of $10.21, showing a remarkable year-over-year growth of more than 104%. This adds to a history of strong annual EPS growth, including a 532.8% rise in the last reported fiscal year.
- Consistent Quarterly Momentum: While the high growth rates from earlier quarters have eased, the company keeps reporting solid year-over-year EPS increases. The latest quarter saw growth of 53.2%, after 65.2% growth in the quarter before. Analysts expect this pattern to continue, with forecasts suggesting 84% growth for the next quarter.
- Profit Margin Growth: A main part of good growth is growing profitability. Seagate's profit margin in the last quarter was 20.99%, showing step-by-step gain from 20.88% and 19.97% in the two previous quarters. This margin growth from 16.15% in the last full year and 5.11% the year before points to notable operational efficiency.
- Analyst Confidence: The fundamental view is supported by favorable analyst opinion. Over the past three months, the average estimate for next year's EPS has been raised by 14.3%, showing increasing belief in the company's short-term earnings possibility.
Technical Soundness and Setup Quality
While the fundamental story gives the "why," the technical view gives the "when" for possible investment review. According to the detailed ChartMill Technical Analysis report, STX shows a notable technical profile.
Technical Health: Seagate gets a perfect Technical Rating of 10 out of 10, showing very good technical health. The report states that both the long-term and short-term trends are positive. The stock is doing better than 98% of the market over the past year and is trading above all important moving averages (20, 50, 100, and 200-day), which are all in a rising pattern. This matches the momentum investor's need for a stock to be in a clear and set upward trend.
Setup Quality: With a Setup Rating of 7, the stock is seen to be in a reasonable consolidation pattern. After a notable rise, the price movement has become tighter, with the stock trading in a range between about $389 and $460 over the past month. This decrease in movement and creation of a base is common before a possible next step up. The analysis finds a clear support area between $411.10 and $419.95, made by a mix of trendlines and moving averages, which gives a sensible zone for a stop-loss order.
The mix of a high technical rating and a positive setup rating is exactly what the screening method looks for: a fundamentally sound stock pausing within a strong upward trend, possibly preparing for a new upward move.
Conclusion
Seagate Technology shows a case where solid fundamental growth metrics, shown by its High Growth Momentum Rating, meet a technically sound chart pattern. The company's notable earnings growth, margin growth, and positive analyst changes provide the fundamental drive, while its market-leading relative performance and favorable consolidation phase offer a defined technical structure. For investors using a growth momentum plan, this meeting of factors makes STX a stock worth further review.
Interested in finding similar opportunities? You can run the screen that found Seagate, searching for stocks with a Setup Rating >7, a Technical Rating >7, and a High Growth Momentum Rating >4, yourself using this High Growth Momentum Breakout Setups Screen.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. The analysis is based on data provided and reflects conditions at a specific point in time. 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.
