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Trade-Ideas: Red Hat (RHT) Is Today's Post-Market Leader 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 Red Hat ( RHT) as a post-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified Red Hat as such a stock due to the following factors:

  • RHT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $101.5 million.
  • RHT is up 5.1% today from today's close.

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More details on RHT:

Red Hat, Inc. provides open source software solutions primarily to enterprise customers worldwide. The company develops and offers operating system, middleware, virtualization, storage, and cloud technologies. RHT has a PE ratio of 64.6. Currently there are 16 analysts that rate Red Hat a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Red Hat has been 1.5 million shares per day over the past 30 days. Red Hat has a market cap of $10.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.18 and a short float of 2.1% with 1.72 days to cover. Shares are down 0.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Red Hat as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • RHT's revenue growth has slightly outpaced the industry average of 10.9%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RHT 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 1.24, which illustrates the ability to avoid short-term cash problems.
  • RED HAT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RED HAT INC increased its bottom line by earning $0.77 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.47 versus $0.77).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 49.6% when compared to the same quarter one year prior, rising from $34.77 million to $52.03 million.
  • The gross profit margin for RED HAT INC is currently very high, coming in at 88.35%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RHT's net profit margin of 13.11% significantly trails the industry average.

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