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Today's Momo Momentum Stock Is McKesson (MCK)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified McKesson ( MCK) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified McKesson as such a stock due to the following factors:

  • MCK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $269.1 million.
  • MCK has a PE ratio of 27.0.
  • MCK is currently in the upper 30% of its 1-year range.
  • MCK is in the upper 25% of its 20-day range.
  • MCK is in the upper 35% of its 5-day range.
  • MCK is currently trading above yesterday's high.
  • MCK has experienced a gap between today's open and yesterday's close of 0.6%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in MCK with the Ticky from Trade-Ideas. See the FREE profile for MCK NOW at Trade-Ideas

More details on MCK:

McKesson Corporation, together with its subsidiaries, delivers pharmaceuticals, medical supplies, and health care information technologies to the healthcare industry primarily in the United States. It operates in two segments, McKesson Distribution Solutions and McKesson Technology Solutions. The stock currently has a dividend yield of 0.6%. MCK has a PE ratio of 27.0. Currently there are 14 analysts that rate McKesson a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for McKesson has been 1.8 million shares per day over the past 30 days. McKesson has a market cap of $40.3 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.93 and a short float of 1% with 1.48 days to cover. Shares are up 8.8% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates McKesson as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • MCK's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 10.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MCK's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
  • Compared to its closing price of one year ago, MCK's share price has jumped by 67.44%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • MCKESSON CORP's earnings per share declined by 47.2% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, MCKESSON CORP increased its bottom line by earning $5.61 versus $5.60 in the prior year. This year, the market expects an improvement in earnings ($8.19 versus $5.61).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market, MCKESSON CORP's return on equity exceeds that of both the industry average and the S&P 500.

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