Intuit Ahead Of Earnings: Strong Buy Rating And A Tight Trend Channel

Financial software firm Intuit (INTU) is set to release earnings on May 25 and the company’s fundamentals and chart look pretty good right now. Over the past year, the stock has been trending higher and there is a tight trend channel that helps define the cycles within the overall upward trend.

The lows from last fall and from the last few months all connect nicely to form the lower rail of the channel. The parallel upper rail isn’t quite as clean, but it helps define the upside swings and where it can see some short-term profit-taking.

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As you can see, the stock is getting close to the upper rail of the channel at this time and the weekly stochastic indicators are in overbought territory. The 10-week RSI isn’t quite hitting AN overbought reading just yet, but it is awfully close. The stochastic indicators have moved in to overbought territory and remained there on several occasions, but when the RSI has moved above 70, it has been a pretty good sign of a short-term downturn. It’s also worth noting that the RSI hasn’t been below 50 since April 2020.

Strong Profitability Measurements Highlight the Fundamental Picture

Intuit gets a “strong buy” rating from Tickeron’s Scorecard and a big part of that rating is due to its fundamentals. At this time the company gets positive marks in five out of six categories with the only one showing negative at this time being the SMR rating and I think that is a technical issue that I asked to be checked. The reason I asked the tech team to check the rating was that Intuit’s profitability measurements are really high. The return on equity is at 46.9% and the profit margin is at 35.1%.

(Click on image to enlarge)

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The company has seen solid earnings and sales growth over the last three years, but it did have a little hiccup in the fiscal second quarter. Earnings have increased by an average of 14% per year in the last three years while sales have increased by 11%. In Q2 earnings declined by 41% and sales declined by 7%.

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