The financial sector has lagged the other sectors over the last six months and there are a number of companies with really strong fundamentals that have gotten caught up in the sector’s performance — a guilt by association move lower in many cases.
Northern Trust stock hasn’t moved down as sharply as other companies, but it has moved down slightly and that has brought two key support levels into play.
Looking at the weekly chart for Northern Trust, we see that the NTRS stock price has been methodically moving higher over the past two and a half years.
A trend channel has formed that defines the various cycles and NTRS stock just hit the lower rail of that channel.
The second layer of support comes from Northern Trust stock’s 52-week moving average. The moving average is almost right on top of the lower rail of the channel and that makes the area even stronger as support.
It is also worth pointing out how low the overbought/oversold indicators are at this time. The 10-week RSI moved down below the 45 level before the bounce last week and the weekly stochastic readings are hitting the 30 level. When these two indicators have reached those points in the past few years, in each instance it has been a good sign for a move higher in the following months.
I mentioned earlier that there were companies with strong fundamentals that were moving lower due to the fact they are part of the financial sector. Northern Trust stock has great fundamentals. The earnings-per-share rating from Investor’s Business Daily is 93, which means the company’s earnings growth over the last few quarters and last three years has been better than 93% of all publicly traded companies.
Why Northern Trust Stock Looks Appealing Now
If we look at the figures that make up the EPS rating for NTRS stock, we see that the company has averaged annual earnings growth of 13% over the last three years. The most recent quarterly report showed year-over-year earnings growth of 42%. Analysts expect the company to grow earnings by 37% this year.
A second rating from Investor Business Daily is the SMR rating. The SMR rating measures sales growth, profit margin and the return on equity of a company and compares these measurements against other companies in their database. Northern Trust gets an A rating in this category and that is the highest rating a company can get.
Sales have grown by an average of 9% over the last three years and they grew by 19% in the most recent quarter. The profitability measurements are really strong with a profit margin of 29% and a return on equity of 11.6%. The operating margin isn’t included in the SMR rating calculation, but it is at 33.1%.
Another statistic that I noticed about Northern Trust is that it isn’t getting much love from analysts. There are 19 analysts following Northern Trust stock and only six rank it as a buy. There are 12 that rate it as a hold and one rates it as a sell. This leaves plenty of room for upgrades.
When I see a chart like NTRS stock’s weekly chart and then see strong fundamentals and bearish sentiment, this is the perfect bullish scenario. The company (the fundamentals) is performing better than the stock (the chart). Investors and analysts aren’t overly optimistic about NTRS stock, so there is still room for new investors to jump on the stock and drive the price higher.
I look for Northern Trust stock to move up by 20% to 25% in the next six months.
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Source: Investor Place