For investors looking to join solid core business progress with positive chart formations, a multi-layered screening method can be very useful. One such process involves selecting for stocks that show a solid fundamental growth picture, as judged by ChartMill's High Growth Momentum (HGM) Rating, while also showing technical health and a promising price formation. This method tries to find companies where improving business foundations are meeting a technically prepared stock, possibly creating conditions for a notable price change. TKO GROUP HOLDINGS INC (NYSE:TKO), the company created from the joining of UFC and WWE, recently appeared from such a screen, deserving further examination from growth-focused investors.
High Growth Momentum Picture
The center of this method starts with the High Growth Momentum Rating, which combines a number of important growth and momentum measures into one score. For TKO, the HGM Rating of 6 points to a firm, better-than-average growth picture. This score comes from a review of both recent results and future projections, concentrating on the speed and character of growth.
A more detailed look at the given data shows the varied but encouraging reasons for this rating:
- Notable Top-Line Growth: The company's revenue growth is a definite strong point. Year-over-year sales growth for the trailing twelve months (TTM) is a large 68.85%, and the latest quarter saw sales rise 61.65% compared to the same time last year. This shows forceful core business increase.
- Earnings Momentum Differences: The earnings view is more mixed. While the latest quarter showed a major year-over-year drop in EPS, the two quarters before recorded solid growth of 67.86% and 62.50%, in turn. Also, analysts forecast a strong recovery, with EPS for the coming quarter expected to grow more than 104% year-over-year. This forecasted speed gain is a key part for momentum investors.
- Positive Changes and Surprises: The company has a record of exceeding forecasts, with an average EPS surprise of 24.05% over the last four quarters. While short-term EPS projections have seen some lowering, revenue projections for the next year have been raised by 0.57% in the last three months, showing analyst belief in continued sales force.
- Cash Flow and Margin Improvement: Free Cash Flow per share has grown a notable 44.06% over the past year, a signal of financial soundness. The profit margin, while changeable on a quarterly basis, shows a clear year-over-year gain, widening from 0.34% in the previous fiscal year to 4.13% in the latest.
This mix of solid sales growth, forecasted earnings speed gain, positive surprises, and better cash flow and margins supports the stock's place in a high-growth momentum screen, even as it manages the period after the merger.
Technical Health and Formation Quality
A solid growth narrative is most effective when joined with a technically sound stock chart. According to ChartMill's detailed Technical Analysis Report, TKO performs well here, getting a full Technical Rating of 10 and a high Setup Rating of 8.
The technical report notes several key positives that match well with a breakout-focused method:
- Clear Trend: Both the short-term and long-term trends are graded as positive, a "very positive signal" that shows steady buying interest across different time frames.
- Market Outperformance: The stock is doing better than 86% of the market over the past year and is trading close to its 52-week high, while the wider S&P 500 is not. This comparative strength is a trait of stocks leading the market.
- Firm Support Framework: The review finds several levels of support below the present price, including a main area between $208.41 and $214.82 made by key moving averages and trendlines. A clear support zone allows for more precise risk control.
- Narrowing Before Possible Breakout: The report states "reduced volatility while prices have been moving in a limited range in the latest period." This creation of a tighter trading band, or base, after a prior rise is a standard formation for a new breakout. The setup review ends there is "very little resistance above the current price," proposing a clear way higher if the stock can gather the force to move past the recent range high.
Meeting of Growth and Technicals
The investment case for TKO, from this method's view, depends on the meeting of its fundamental and technical qualities. The High Growth Momentum Rating verifies the company is in a time of major business increase and forecasted earnings speed gain, the needed force for a continued stock price rise. At the same time, the excellent Technical Rating verifies the market is already seeing this strength, as shown by the stock's forceful uptrend and leader position.
The important last part is the Setup Rating of 8. It shows the stock is not just advanced but is absorbing its increases in a sound narrowing. This gives a possible entry chance for investors who follow the CANSLIM or Minervini approaches, which stress buying breakouts from such shapes. The screen successfully finds stocks where solid growth foundations (the "reason" to buy) are met with a technically good chart giving a specific, lower-risk entry chance (the "time" to buy).
Locating Comparable Chances
TKO shows one present instance of a stock that matches this high-growth momentum breakout profile. For investors wanting to find other companies that meet these particular conditions, a Setup Rating above 7, a TA Rating above 7, and a High Growth Momentum Rating above 4, the preset screen is ready to use each day. You can find more possible formations by going to the High Growth Momentum Breakout Setups Screen.
Disclaimer: This article is for information only and does not form investment guidance, a suggestion, or a deal to buy or sell any security. The review is based on given data and specific screening conditions, which may alter. Investing includes risk, including the possible loss of original funds. Always do your own research, think about your financial position and risk comfort, and talk with a registered financial advisor before making any investment choices.
