Is NYSE:SHOP on the Verge of a Major Breakout as a Strong Growth Stock?

Growth investors are on the lookout for stocks displaying robust revenue and EPS growth. In this analysis, we'll assess whether SHOPIFY INC - CLASS A (NYSE:SHOP) aligns with growth investing criteria, especially as it consolidates and signals a possible breakout. As always, investors should conduct their own research, but SHOPIFY INC - CLASS A has surfaced on our radar for growth with base formation, warranting further examination.

ChartMill's Evaluation of Growth

A key component of ChartMill's stock assessment is the Growth Rating, which spans from 0 to 10. This rating evaluates diverse growth factors, such as EPS and revenue growth, considering both past performance and future projections. NYSE:SHOP has received a 9 out of 10:

• SHOP shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 150.00%, which is quite impressive.
• Measured over the past years, SHOP shows a very strong growth in Earnings Per Share. The EPS has been growing by 82.56% on average per year.
• SHOP shows a strong growth in Revenue. In the last year, the Revenue has grown by 23.47%.
• Measured over the past years, SHOP shows a very strong growth in Revenue. The Revenue has been growing by 45.76% on average per year.
• Based on estimates for the next years, SHOP will show a very strong growth in Earnings Per Share. The EPS will grow by 32.75% on average per year.
• SHOP is expected to show a strong growth in Revenue. In the coming years, the Revenue will grow by 22.03% yearly.

Analyzing Health Metrics

ChartMill utilizes a Health Rating to assess stocks, scoring them on a scale of 0 to 10. This rating takes into account a variety of liquidity and solvency ratios, both in absolute terms and in comparison to industry peers. NYSE:SHOP has earned a 8 out of 10:

• An Altman-Z score of 43.40 indicates that SHOP is not in any danger for bankruptcy at the moment.
• SHOP has a Altman-Z score of 43.40. This is amongst the best in the industry. SHOP outperforms 98.77% of its industry peers.
• SHOP has a debt to FCF ratio of 0.64. This is a very positive value and a sign of high solvency as it would only need 0.64 years to pay back of all of its debts.
• Looking at the Debt to FCF ratio, with a value of 0.64, SHOP belongs to the top of the industry, outperforming 82.72% of the companies in the same industry.
• SHOP has a Debt/Equity ratio of 0.09. This is a healthy value indicating a solid balance between debt and equity.
• SHOP's Debt to Equity ratio of 0.09 is fine compared to the rest of the industry. SHOP outperforms 67.90% of its industry peers.
• A Current Ratio of 7.10 indicates that SHOP has no problem at all paying its short term obligations.
• SHOP's Current ratio of 7.10 is amongst the best of the industry. SHOP outperforms 98.77% of its industry peers.
• A Quick Ratio of 7.10 indicates that SHOP has no problem at all paying its short term obligations.
• With an excellent Quick ratio value of 7.10, SHOP belongs to the best of the industry, outperforming 98.77% of the companies in the same industry.

How do we evaluate the Profitability for NYSE:SHOP?

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NYSE:SHOP was assigned a score of 5 for profitability:

• Looking at the Return On Assets, with a value of 11.23%, SHOP belongs to the top of the industry, outperforming 88.89% of the companies in the same industry.
• SHOP has a Return On Equity of 13.68%. This is in the better half of the industry: SHOP outperforms 74.07% of its industry peers.
• SHOP has a better Return On Invested Capital (5.91%) than 62.96% of its industry peers.
• SHOP has a better Profit Margin (16.85%) than 93.83% of its industry peers.
• With a decent Operating Margin value of 11.51%, SHOP is doing good in the industry, outperforming 75.31% of the companies in the same industry.
• The Gross Margin of SHOP (50.93%) is better than 74.07% of its industry peers.

Why is NYSE:SHOP a setup?

Besides the Technical Rating, ChartMill assigns a Setup Rating to every stock to determine the degree of consolidation. This rating, ranging from 0 to 10, is updated daily and evaluates various short-term technical indicators. NYSE:SHOP currently holds a 7 as its setup rating, suggesting a particular level of consolidation in the stock.

SHOP has an excellent technical rating and also presents a decent setup pattern. Prices have been consolidating lately and the volatility has been reduced. There is very little resistance above the current price. Very recently a Pocket Pivot signal was observed. This is another positive sign.

Every day, new Strong Growth stocks can be found on ChartMill in our Strong Growth screener.

For an up to date full fundamental analysis you can check the fundamental report of SHOP

Our latest full technical report of SHOP contains the most current technical analsysis.

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.