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

  • AGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $493.4 million.
  • AGN has a PE ratio of 31.2.
  • AGN is currently in the upper 30% of its 1-year range.
  • AGN is in the upper 25% of its 20-day range.
  • AGN is in the upper 35% of its 5-day range.
  • AGN is currently trading above yesterday's high.
  • AGN has experienced a gap between today's open and yesterday's close of 1.8%.

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

More details on AGN:

Allergan, Inc. operates as a multi-specialty health care company primarily in the United States, Europe, Latin America, and the Asia Pacific. The stock currently has a dividend yield of 0.1%. AGN has a PE ratio of 31.2. Currently there are 9 analysts that rate Allergan a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Allergan has been 2.8 million shares per day over the past 30 days. Allergan has a market cap of $36.2 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.68 and a short float of 1% with 0.82 days to cover. Shares are up 11.6% year-to-date as of the close of trading on Monday.

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 Allergan 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, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 14.4%. 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 current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.64, which clearly demonstrates the ability to cover short-term cash needs.
  • ALLERGAN INC reported flat earnings per share in the most recent 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, ALLERGAN INC increased its bottom line by earning $4.20 versus $3.57 in the prior year. This year, the market expects an improvement in earnings ($5.46 versus $4.20).
  • Net operating cash flow has slightly increased to $515.30 million or 3.08% when compared to the same quarter last year. Despite an increase in cash flow, ALLERGAN INC's average is still marginally south of the industry average growth rate of 11.17%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, ALLERGAN INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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

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