Screening for growth stocks that also exhibit a sound technical setup can help investors identify companies where strong fundamentals and favorable price action align. The approach combines fundamental filters for revenue and earnings growth with technical criteria that look for breakout patterns, consolidation phases, and reasonable risk/reward levels. ENSIGN GROUP INC/THE (NASDAQ:ENSG), a skilled nursing and senior living provider based in San Juan Capistrano, California, currently stands out in such a screen: the company shows double-digit growth across its top and bottom lines, solid profitability, and a technical pattern that suggests a potential breakout after a recent pullback.
Strong growth, decent profitability, and a manageable balance sheet
The growth side of the screening methodology requires more than just a rising share price; it asks for evidence that the underlying business is expanding. Ensign Group delivers on that front. The company's fundamental report shows a ChartMill Growth rating of 7 out of 10, supported by:
- Revenue growth of 18.89% over the last year, with an average annual increase of 16.05% over the past several years
- EPS growth of 20.70% in the last year, and an average annual EPS growth of 15.99%
- Forward estimates calling for EPS growth of 12.33% and revenue growth of 11.84% per year, indicating that the expansion is expected to continue, albeit at a more moderate pace
Profitability is another area where the company scores well. The ChartMill Profitability rating comes in at 7 out of 10, with a profit margin of 6.90% that outperforms roughly 84% of its industry peers in the Health Care Providers & Services group. Return on equity stands at 15.51%, better than 81% of the industry, and return on invested capital of 7.34% also ranks above the majority of competitors. Those metrics matter because a growth stock that cannot convert revenue into profits eventually disappoints; Ensign has been consistently profitable over the past five years, with positive operating cash flow in each of those years.
The balance sheet also passes the screen's health requirement. Ensign carries a debt-to-FCF ratio of just 0.33, meaning it could theoretically pay off all of its debt in under four months, a figure that places it in the top 10% of its industry. Debt-to-equity is only 0.06, and the Altman-Z score of 3.61 signals no immediate bankruptcy risk. The ChartMill Health rating of 6 out of 10 reflects a few minor concerns, including share count dilution and a return on invested capital that remains slightly below the cost of capital, but the overall financial position is solid enough for a growth-oriented strategy.
Investors who want to examine the full fundamental breakdown can consult the fundamental analysis report for a detailed view of the five key rating areas.
Technical setup: a bull flag with limited overhead resistance
The technical side of the screen is just as important as the fundamentals. Even a fundamentally strong company can produce poor returns if the stock is in a downtrend or facing heavy overhead supply. Ensign's technical report shows a setup rating of 7 out of 10, with a price pattern that often precedes a breakout: a bull flag.
The stock recently moved higher and has since pulled back on considerably lower volume, a combination that typically indicates selling pressure is limited. The short-term trend is positive, while the long-term trend is still neutral, which means the stock is in the early stages of repairing its longer-term picture.
Key technical levels stand out from the report:
- Support zone: $170.06 to $177.22, formed by trend lines and moving averages across multiple time frames, with additional support near $166.34 and $152.53
- Resistance: $178.17, followed by a zone between $181.86 and $183.15
- Current price: $177.23, sitting just above the first support zone
With little resistance above the current price, the stock could have room to move higher if the bull flag resolves to the upside. The 52-week range is wide, from $141.58 to $218.00, and the stock is currently trading roughly in the middle of that range. A one-month gain of 6.23% and a 12-month gain of 10.33% show that recent momentum is turning positive, even though the stock underperformed the broader market over the past six months.
For a more complete view of the price action, support, and resistance levels, the technical analysis report provides the full chart-based breakdown.
Why the combination matters
The logic behind the screen is straightforward: a company like Ensign offers the fundamental fuel for a sustained move, while the technical pattern helps time an entry. Buying a stock with roughly 19% revenue growth and 21% EPS growth is less attractive if the chart is broken, just as a bullish chart pattern is less reliable when the underlying business is deteriorating. Ensign scores reasonably well on both dimensions, with the caveat that the valuation is not cheap.
The ChartMill Valuation rating is only 3 out of 10, reflecting a trailing P/E of 24.51 and a forward P/E of 20.86. Those multiples are not extreme relative to the S&P 500, but they are not bargain levels either. The PEG ratio, which adjusts the price-to-earnings multiple for expected growth, suggests the valuation is roughly in line with the company's projected 12.33% EPS growth, and the strong profitability rating can justify a premium. Still, growth investors should be aware that the market is already paying up for the expansion.
Risks to consider
No screen is perfect, and Ensign carries some risks worth monitoring. The operating margin has declined in recent years, and the gross margin has also trended lower. Meanwhile, the pace of earnings and revenue growth is expected to moderate from recent levels, which means the "strong growth" label could get harder to defend if forward estimates are not met. As noted, the long-term technical trend is still neutral, and 60% of the stocks in the Health Care Providers & Services industry are currently performing better than Ensign, so patience and position sizing remain important.
The bottom line
Ensign Group fits the profile of a strong-growth stock with a decent technical setup. The combination of 20% EPS growth, industry-leading profitability on several key measures, a low debt load, and a bull flag pattern near support gives it a reasonable risk/reward profile for investors who follow this methodology. The main drawback is valuation, which already discounts a good portion of the expected growth. For investors looking for more candidates that pass the same strict filters, the strong-growth technical setup screen compiles a list of similar opportunities worth reviewing.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
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Ensign Group (NASDAQ:ENSG): Strong Growth Meets a Promising Technical Setup
Screening for growth stocks that also exhibit a sound technical setup can help investors identify companies where strong fundamentals and favorable price action align. The approach combines fundamental filters for revenue and earnings growth with technical criteria that look for breakout patterns, consolidation phases, and reasonable risk/reward levels. ENSIGN GROUP INC/THE (NASDAQ:ENSG), a skilled nursing and senior living provider based in San Juan Capistrano, California, currently stands out in such a screen: the company shows double-digit growth across its top and bottom lines, solid profitability, and a technical pattern that suggests a potential breakout after a recent pullback.
Strong growth, decent profitability, and a manageable balance sheet
The growth side of the screening methodology requires more than just a rising share price; it asks for evidence that the underlying business is expanding. Ensign Group delivers on that front. The company's fundamental report shows a ChartMill Growth rating of 7 out of 10, supported by:
Profitability is another area where the company scores well. The ChartMill Profitability rating comes in at 7 out of 10, with a profit margin of 6.90% that outperforms roughly 84% of its industry peers in the Health Care Providers & Services group. Return on equity stands at 15.51%, better than 81% of the industry, and return on invested capital of 7.34% also ranks above the majority of competitors. Those metrics matter because a growth stock that cannot convert revenue into profits eventually disappoints; Ensign has been consistently profitable over the past five years, with positive operating cash flow in each of those years.
The balance sheet also passes the screen's health requirement. Ensign carries a debt-to-FCF ratio of just 0.33, meaning it could theoretically pay off all of its debt in under four months, a figure that places it in the top 10% of its industry. Debt-to-equity is only 0.06, and the Altman-Z score of 3.61 signals no immediate bankruptcy risk. The ChartMill Health rating of 6 out of 10 reflects a few minor concerns, including share count dilution and a return on invested capital that remains slightly below the cost of capital, but the overall financial position is solid enough for a growth-oriented strategy.
Investors who want to examine the full fundamental breakdown can consult the fundamental analysis report for a detailed view of the five key rating areas.
Technical setup: a bull flag with limited overhead resistance
The technical side of the screen is just as important as the fundamentals. Even a fundamentally strong company can produce poor returns if the stock is in a downtrend or facing heavy overhead supply. Ensign's technical report shows a setup rating of 7 out of 10, with a price pattern that often precedes a breakout: a bull flag.
The stock recently moved higher and has since pulled back on considerably lower volume, a combination that typically indicates selling pressure is limited. The short-term trend is positive, while the long-term trend is still neutral, which means the stock is in the early stages of repairing its longer-term picture.
Key technical levels stand out from the report:
With little resistance above the current price, the stock could have room to move higher if the bull flag resolves to the upside. The 52-week range is wide, from $141.58 to $218.00, and the stock is currently trading roughly in the middle of that range. A one-month gain of 6.23% and a 12-month gain of 10.33% show that recent momentum is turning positive, even though the stock underperformed the broader market over the past six months.
For a more complete view of the price action, support, and resistance levels, the technical analysis report provides the full chart-based breakdown.
Why the combination matters
The logic behind the screen is straightforward: a company like Ensign offers the fundamental fuel for a sustained move, while the technical pattern helps time an entry. Buying a stock with roughly 19% revenue growth and 21% EPS growth is less attractive if the chart is broken, just as a bullish chart pattern is less reliable when the underlying business is deteriorating. Ensign scores reasonably well on both dimensions, with the caveat that the valuation is not cheap.
The ChartMill Valuation rating is only 3 out of 10, reflecting a trailing P/E of 24.51 and a forward P/E of 20.86. Those multiples are not extreme relative to the S&P 500, but they are not bargain levels either. The PEG ratio, which adjusts the price-to-earnings multiple for expected growth, suggests the valuation is roughly in line with the company's projected 12.33% EPS growth, and the strong profitability rating can justify a premium. Still, growth investors should be aware that the market is already paying up for the expansion.
Risks to consider
No screen is perfect, and Ensign carries some risks worth monitoring. The operating margin has declined in recent years, and the gross margin has also trended lower. Meanwhile, the pace of earnings and revenue growth is expected to moderate from recent levels, which means the "strong growth" label could get harder to defend if forward estimates are not met. As noted, the long-term technical trend is still neutral, and 60% of the stocks in the Health Care Providers & Services industry are currently performing better than Ensign, so patience and position sizing remain important.
The bottom line
Ensign Group fits the profile of a strong-growth stock with a decent technical setup. The combination of 20% EPS growth, industry-leading profitability on several key measures, a low debt load, and a bull flag pattern near support gives it a reasonable risk/reward profile for investors who follow this methodology. The main drawback is valuation, which already discounts a good portion of the expected growth. For investors looking for more candidates that pass the same strict filters, the strong-growth technical setup screen compiles a list of similar opportunities worth reviewing.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »