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

  • BRCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $208.0 million.
  • BRCM has a PE ratio of 57.0.
  • BRCM is currently in the upper 30% of its 1-year range.
  • BRCM is in the upper 25% of its 20-day range.
  • BRCM is in the upper 35% of its 5-day range.
  • BRCM is currently trading above yesterday's high.
  • BRCM has experienced a gap between today's open and yesterday's close of 3%.

'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.

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More details on BRCM:

Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office, and mobile environments. The stock currently has a dividend yield of 1.2%. BRCM has a PE ratio of 57.0. Currently there are 22 analysts that rate Broadcom a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Broadcom has been 8.2 million shares per day over the past 30 days. Broadcom has a market cap of $20.5 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.90 and a short float of 2.1% with 1.83 days to cover. Shares are up 30.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Broadcom as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • BRCM's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BRCM has a quick ratio of 2.30, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 56.18% to $606.00 million when compared to the same quarter last year. In addition, BROADCOM CORP has also vastly surpassed the industry average cash flow growth rate of -8.13%.
  • The gross profit margin for BROADCOM CORP is rather high; currently it is at 54.54%. Regardless of BRCM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BRCM's net profit margin of 8.31% is significantly lower than the industry average.
  • BROADCOM CORP's earnings per share declined by 15.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BROADCOM CORP reported lower earnings of $0.74 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $0.74).
  • BRCM, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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