VIAVI SOLUTIONS INC (NASDAQ:VIAV) has been identified by a specific screen made to find notable opportunities for investors focused on growth. The screen uses three distinct ChartMill ratings to select stocks that show good fundamental growth momentum and are also in a positive technical state for a possible move higher. Specifically, it finds companies with a High Growth Momentum (HGM) Rating above 4, pointing to good earnings and sales trends, together with a Technical Rating and a Setup Rating both above 7, indicating a strong price trend and a good consolidation pattern. This method tries to answer two important questions for traders: which stock has the fundamental growth, and when is a sound entry point available.
Fundamental Growth Momentum
The center of the strategy is finding companies with improving business fundamentals, measured by the ChartMill High Growth Momentum Rating. VIAVI receives a rating of 6 here, showing a good base of growth across several important measures. This score comes from a review of recent earnings and sales performance, trends in improvement, and analyst outlook.
- Good Earnings Growth: The company has shown considerable year-over-year earnings per share (EPS) growth. Trailing twelve-month (TTM) EPS grew about 97%, and recent quarterly comparisons show notable momentum, with growth rates of 150%, 62.5%, and 150% over the past three comparable quarters.
- Good Sales Increase: Revenue growth is also notable. TTM sales rose by over 23%, and the most recent quarter saw sales grow 36.4% compared to the same period last year. Analyst forecasts suggest this sales momentum will carry on into the next quarter.
- Positive Earnings Surprises: A main part of the HGM rating is a company's record of consistently surpassing expectations. VIAVI has exceeded EPS estimates in each of the last four quarters, with an average surprise of over 15%.
- Upward Analyst Revisions: The outlook of Wall Street is seen in increasing estimates. Over the last three months, the average analyst estimate for next year's EPS has been raised by more than 24%, a positive sign of belief in the company's near-term future.
These items together create an image of a company seeing a significant rise in its financial performance. For investors focused on high-growth momentum, these are the important elements that can lead to continued stock price gains, making the HGM rating a key first step in the selection process.
Technical Strength and Trend
While good fundamentals give the "why," technical analysis helps find the "when." According to the detailed ChartMill Technical Report, VIAVI has a perfect Technical Rating of 10 out of 10. This high score shows the stock is in a strong position from a price trend view.
- Steady Uptrends: Both the short-term and long-term trends for VIAV are rated as positive, a pairing that implies strong and continued buying interest.
- Market Position: The stock's relative strength is very good, performing better than 98% of all stocks in the market over the past year. It also is in the top group of its Communications Equipment industry.
- Supportive Moving Averages: The stock price is trading above all important moving averages (20, 50, 100, and 200-day), and each of these averages is itself in a rising pattern, confirming the strength of the basic trend.
This technical condition is important for the strategy because it confirms the stock is already in a confirmed uptrend and is showing market-leading action, matching methods like CANSLIM that stress buying leading stocks in leading industries.
The Setup and Possible Entry
A high technical rating by itself is not a buy signal; the stock must also show a feasible, lower-risk entry point. This is where the Setup Rating of 7 gains importance. The report states that VIAVI "presents a decent setup pattern," marked by less volatility and price consolidation within its recent trading range after a notable rise.
- Consolidation Phase: The stock has been trading between $25.69 and $35.61 over the past month and is now situated in the middle of this range. This time of consolidation lets the stock absorb its earlier gains and form a new base for a possible next move higher.
- Clear Risk Parameters: The analysis finds a defined support zone between $30.09 and $30.25, created by a mix of trendlines and moving averages. This gives a logical area below which a stop-loss order could be set to control risk, a key part of structured trading.
- Breakout Level: The proposed entry point for a possible breakout is at $33.83, which is just above a recent high. A move above this level could indicate the restart of the primary uptrend.
The existence of a quality setup is what divides a stock that is simply rising from one that gives a planned opportunity. It lets investors plan their trade with defined entry and exit points, directly answering the "when to buy" question that adds to the fundamental "what to buy" idea.
Conclusion
VIAVI Solutions shows a situation where notable fundamental growth momentum meets a technically sound chart pattern. The company's good earnings and sales improvement, along with positive analyst revisions, meet the standards looked for by growth investors. At the same time, its perfect technical rating confirms a leading position in the market, while the good setup points out a possible entry point after a time of consolidation. This meeting of fundamental and technical items is exactly what the combined screening method is made to find.
For investors wanting to review other stocks that meet these particular standards of high growth momentum and positive technical setups, more results can be found by using the 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 and tools provided by ChartMill, and past performance is not indicative of future results. Investors should conduct their own due diligence and consider their individual financial situation and risk tolerance before making any investment decisions.