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Trade-Ideas: F5 Networks (FFIV) Is Today's Momo Momentum Stock

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 F5 Networks ( FFIV) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified F5 Networks as such a stock due to the following factors:

  • FFIV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $153.6 million.
  • FFIV has a PE ratio of 32.9.
  • FFIV is currently in the upper 30% of its 1-year range.
  • FFIV is in the upper 25% of its 20-day range.
  • FFIV is in the upper 35% of its 5-day range.
  • FFIV is currently trading above yesterday's high.
  • FFIV has experienced a gap between today's open and yesterday's close of 1%.

'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 FFIV with the Ticky from Trade-Ideas. See the FREE profile for FFIV NOW at Trade-Ideas

More details on FFIV:

F5 Networks, Inc. develops, markets, and sells application delivery networking products that optimize the security, performance, and availability of network applications, servers, and storage systems. FFIV has a PE ratio of 32.9. Currently there are 15 analysts that rate F5 Networks a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for F5 Networks has been 1.9 million shares per day over the past 30 days. F5 has a market cap of $8.7 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 2.39 and a short float of 9.6% with 5.53 days to cover. Shares are up 26.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates F5 Networks 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, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • FFIV's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 11.2%. 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.
  • FFIV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
  • F5 NETWORKS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, F5 NETWORKS INC increased its bottom line by earning $3.51 versus $3.45 in the prior year. This year, the market expects an improvement in earnings ($5.23 versus $3.51).
  • Net operating cash flow has slightly increased to $158.93 million or 9.75% when compared to the same quarter last year. Despite an increase in cash flow, F5 NETWORKS INC's average is still marginally south of the industry average growth rate of 19.07%.
  • The gross profit margin for F5 NETWORKS INC is currently very high, coming in at 84.79%. Regardless of FFIV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.74% trails the industry average.

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