AAON INC (NASDAQ:AAON) is a manufacturer of HVAC equipment and cooling solutions. As summer heatwaves intensify and data center demand continues to explode, the company has found itself in a sweet spot. For investors sifting through thousands of stocks, the challenge is finding names that combine strong fundamental growth with a favorable technical setup. A simple approach is to use a combined screening method that filters for companies showing strong earnings and revenue expansion, decent financial health, and a chart pattern that suggests a breakout may be imminent. This is the essence of a "Strong Growth Stocks with good Technical Setup Ratings" screen.
Why This Screening Method Works
The logic behind combining fundamentals and technicals is straightforward. You want a business that is actually growing, not just a stock that is rising on hype. A strong growth stock has expanding revenue, rising earnings, and is usually gaining market share. But even the best business can be a bad investment if you buy at the wrong time. That's where the technical setup comes in. By filtering for patterns like volatility contractions or pockets of accumulation near resistance levels, you improve the odds of catching an upward move shortly after entry.
The screen specifically targets stocks that pass a growth rating of 7 out of 10 or higher, while also requiring decent scores for profitability and health. This ensures that the underlying business isn't deteriorating. It then adds a technical setup rating filter, which looks for stocks that are consolidating or coiling near a resistance level. This combination—a healthy, growing business forming a constructive chart pattern—is the ideal hunting ground for growth investors.
Recent Performance and Market Context
The current market environment provides a supportive backdrop. The S&P 500's short-term trend is positive, while the long-term trend remains neutral. This indicates that momentum is building, but caution is still warranted. In such an environment, a disciplined focus on names with strong relative strength and clear technical setups is a sensible approach.
AAON’s recent performance shows why it was flagged. The stock has risen nearly 79% over the past 12 months and over 61% in the last three months, outperforming 93% of all stocks in the market and 95% of its peers in the Building Products industry. This kind of relative strength is a hallmark of leading growth stocks. While the short-term trend for AAON is currently neutral, the long-term trend remains solidly positive, suggesting that the recent slowdown could be a brief consolidation.
Fundamental Analysis: Excellent Growth at a Price
The fundamental report for AAON assigns an overall rating of 5 out of 10, which is dragged down by a severe valuation score of just 1. However, for a pure growth investor, valuation is often a secondary concern. The key driver here is growth, which scores a strong 7 out of 10.
The details are telling:
- Revenue Growth: Revenue surged 28.27% last year, with a 3-year average annual growth rate of 22.89%. This demonstrates strong top-line expansion.
- Earnings Growth: While earnings per share (EPS) declined -23.96% last year, the forward outlook is dramatically better. Analysts expect EPS to grow by 35.64% annually over the next few years. Revenue is also expected to continue its strong run, with projected annual growth of 16.38%.
- Accelerating Growth: Critically, the EPS growth rate is projected to accelerate compared to the past, which is a strong signal for future stock appreciation.
This strong growth completely justifies the expensive valuation, as captured by a PEG ratio that suggests the stock may actually be fairly priced relative to its earnings trajectory. The report summary confirms this, noting that AAON's ratings make it suitable for growth investing.
Profitability and health both score a middling 5 out of 10, which is decent enough to pass the screen's filter. The company has strong solvency with an Altman-Z score of 9.84 and a manageable debt-to-equity ratio of 0.46. The main issue on profitability is declining margins, which should be monitored but is common during rapid expansion as companies reinvest heavily.
Technical Analysis: A Setup in Formation
The technical report paints an even more interesting picture, with an overall rating of 8 out of 10 and a setup rating of 7. This is the core of the screening method: not just a good stock, but one that is setting up to move.
Key technical observations:
- Consolidation: After a massive run-up, the stock has been trading in a range of roughly 118.61 to 150.46 over the past month. It is currently in the middle of this range, which is classic consolidation behavior.
- Resistance and Support: The report identifies a key resistance zone from 131.87 to 134.83. The stock is currently at 131.60, sitting just below this area. The nearest support is at 121.56.
- Setup Pattern: The report notes a "decent setup pattern" with a suggested entry at 134.84 (just above the resistance) and a stop loss at 127.17 (just below the support). This is a textbook breakout setup: if the stock pushes through the resistance with volume, it could launch higher.
- Accumulation Signal: A "Pocket Pivot" signal has been observed, which is a positive accumulation indicator. This suggests that institutional investors are buying on weakness, a bullish sign for a potential breakout.
The stock's technical layout is that of a leader taking a breather before a potential next leg higher. The combination of high relative strength, a clear resistance level overhead, and a pocket pivot signal gives it the hallmarks of a classic growth stock setup.
The Bottom Line for Investors
AAON represents a textbook example of what this growth screen is designed to find: a company with excellent revenue growth, a strong future earnings outlook, and a chart that appears to be coiling for an upward move. The risk is clear—valuation is expensive and recent margins have compressed—but for investors who focus on capital appreciation over the long term, the growth narrative is strong.
The screen used to find AAON has identified a high-conviction candidate. If you are looking for similar opportunities in the current market, you can run this exact screen yourself. Click here to find more strong growth stocks with good technical setups and start your own research.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The screening methodology and analysis described are tools for research and should not be the sole basis for any investment decision. Always conduct your own due diligence and consult with a qualified financial advisor before making any trades. Past performance is not indicative of future results.
Read full article here »
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AAON INC (NASDAQ:AAON) Sits at a Sweet Spot as Strong Growth and a Bullish Technical Setup Align
AAON INC (NASDAQ:AAON) is a manufacturer of HVAC equipment and cooling solutions. As summer heatwaves intensify and data center demand continues to explode, the company has found itself in a sweet spot. For investors sifting through thousands of stocks, the challenge is finding names that combine strong fundamental growth with a favorable technical setup. A simple approach is to use a combined screening method that filters for companies showing strong earnings and revenue expansion, decent financial health, and a chart pattern that suggests a breakout may be imminent. This is the essence of a "Strong Growth Stocks with good Technical Setup Ratings" screen.
Why This Screening Method Works
The logic behind combining fundamentals and technicals is straightforward. You want a business that is actually growing, not just a stock that is rising on hype. A strong growth stock has expanding revenue, rising earnings, and is usually gaining market share. But even the best business can be a bad investment if you buy at the wrong time. That's where the technical setup comes in. By filtering for patterns like volatility contractions or pockets of accumulation near resistance levels, you improve the odds of catching an upward move shortly after entry.
The screen specifically targets stocks that pass a growth rating of 7 out of 10 or higher, while also requiring decent scores for profitability and health. This ensures that the underlying business isn't deteriorating. It then adds a technical setup rating filter, which looks for stocks that are consolidating or coiling near a resistance level. This combination—a healthy, growing business forming a constructive chart pattern—is the ideal hunting ground for growth investors.
Recent Performance and Market Context
The current market environment provides a supportive backdrop. The S&P 500's short-term trend is positive, while the long-term trend remains neutral. This indicates that momentum is building, but caution is still warranted. In such an environment, a disciplined focus on names with strong relative strength and clear technical setups is a sensible approach.
AAON’s recent performance shows why it was flagged. The stock has risen nearly 79% over the past 12 months and over 61% in the last three months, outperforming 93% of all stocks in the market and 95% of its peers in the Building Products industry. This kind of relative strength is a hallmark of leading growth stocks. While the short-term trend for AAON is currently neutral, the long-term trend remains solidly positive, suggesting that the recent slowdown could be a brief consolidation.
Fundamental Analysis: Excellent Growth at a Price
The fundamental report for AAON assigns an overall rating of 5 out of 10, which is dragged down by a severe valuation score of just 1. However, for a pure growth investor, valuation is often a secondary concern. The key driver here is growth, which scores a strong 7 out of 10.
The details are telling:
This strong growth completely justifies the expensive valuation, as captured by a PEG ratio that suggests the stock may actually be fairly priced relative to its earnings trajectory. The report summary confirms this, noting that AAON's ratings make it suitable for growth investing.
Profitability and health both score a middling 5 out of 10, which is decent enough to pass the screen's filter. The company has strong solvency with an Altman-Z score of 9.84 and a manageable debt-to-equity ratio of 0.46. The main issue on profitability is declining margins, which should be monitored but is common during rapid expansion as companies reinvest heavily.
Technical Analysis: A Setup in Formation
The technical report paints an even more interesting picture, with an overall rating of 8 out of 10 and a setup rating of 7. This is the core of the screening method: not just a good stock, but one that is setting up to move.
Key technical observations:
The stock's technical layout is that of a leader taking a breather before a potential next leg higher. The combination of high relative strength, a clear resistance level overhead, and a pocket pivot signal gives it the hallmarks of a classic growth stock setup.
The Bottom Line for Investors
AAON represents a textbook example of what this growth screen is designed to find: a company with excellent revenue growth, a strong future earnings outlook, and a chart that appears to be coiling for an upward move. The risk is clear—valuation is expensive and recent margins have compressed—but for investors who focus on capital appreciation over the long term, the growth narrative is strong.
The screen used to find AAON has identified a high-conviction candidate. If you are looking for similar opportunities in the current market, you can run this exact screen yourself. Click here to find more strong growth stocks with good technical setups and start your own research.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. The screening methodology and analysis described are tools for research and should not be the sole basis for any investment decision. Always conduct your own due diligence and consult with a qualified financial advisor before making any trades. Past performance is not indicative of future results.
Read full article here »