# 10 Stocks Leading the Stock-Market Rally

BOSTON (TheStreet) -- The **S&P 500** has rallied 8.3% so far this month, led by the following 10 stocks. Some have run too far, too fast, overshooting analysts' price targets, and now look susceptible to a sell-off. Others are poised to extend gains. Below, the stocks are ordered by their return since Sept. 1. Median targets and expected returns are also included.

10.

**Salesforce.com**

(**CRM**) - Get salesforce.com, inc. Report

sells relationship management software. Its stock has rallied 10% in Sept., overshooting analysts' median target of $112.58. The stock is now overpriced and due to fall 7%. Salesforce.com's second-quarter profit fell 30% to $15 million, or 11 cents a share, as revenue advanced 25% to $394 million. The operating margin narrowed from 9.3% to 7.5%. Salesforce.com carries $742 million of cash and $461 million of long-term debt.

Salesforce.com's stock trades at a trailing earnings multiple of 208, a forward earnings multiple of 77, a book value multiple of 12 and a cash flow multiple of 44 -- 542%, 193%, 134% and 130% premiums to software industry averages. The stock's PEG ratio, a measure of value relative to predicted long-run growth, of 2.4 signals a 140% premium to fair value. Salesforce.com has outstanding growth rates, but is overpriced based on all valuation metrics.

9.

**Symantec**

(**SYMC**) - Get Symantec Corporation Report

offers security and systems management services. Its stock has gained 11% in Sept. It is still 11% below analysts' median target. Symantec's second-quarter profit more than doubled to $161 million, or 20 cents a share, as revenue hovered at $1.4 billion. The operating margin extended from 13% to 16%. Symantec holds $2.7 billion of cash and $1.9 billion of debt, equaling a quick ratio of 0.7 and a debt-to-equity ratio of 0.4

Symantec's stock sells for a forward earnings multiple 9.8, a book value multiple of 2.6, a sales multiple of 2 and a cash flow multiple of 7.2 -- 63%, 50%, 83% and 62% discounts to peer averages. Its PEG ratio of 0.3 reflects a 70% discount to fair value. Of analysts covering Symantec, 15, or 43%, rate its stock "buy" and 20 rank it "hold."

**JPMorgan**

(**JPM**) - Get JPMorgan Chase & Co. Report

expects the stock to advance 53% to $23.

**Lazard Capital Markets**

offers a price target of $21.

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8.

**Red Hat**

(**RHT**) - Get Red Hat, Inc. Report

designs and sells open source software to businesses. Its stock has jumped 13% in Sept., but it is predicted to drop 3%, based on analysts' median price target. Red Hat is due to report fiscal second-quarter results on Wednesday. Red Hat's fiscal first-quarter profit rose 30% to $24 million, or 12 cents a share, as revenue increased 20% to $209 million. The operating margin rose from 14% to 16%. Red Hat has $824 million of cash and no debt.

Red Hat's stock trades at a trailing earnings multiple of 82, a forward earnings multiple of 44, a book value multiple of 6.6 and a cash flow multiple of 28 -- 151%, 70%, 25% and 48% premiums to software industry averages. Its PEG ratio of 1.3 indicates a 30% premium to fair value. Of researchers evaluating Red Hat, 13, or 52%, advise purchasing its shares, 11 recommend holding and one suggests selling. A median target of $37.70 indicates 3% downside.

7.

**Akamai Technologies**

(**AKAM**) - Get Akamai Technologies, Inc. Report

sells services to accelerate the delivery of content and applications over the Internet. Its stock has risen 15% in September, surpassing analysts' median target. The shares have 16% of potential downside. Second-quarter profit gained 6% to $38 million, or 20 cents a share, as revenue grew 20% to $245 million. The operating margin dropped from 27% to 23%. Akamai has $504 million of cash and $64 million of debt.

The stock sells for a trailing earnings multiple of 65, a forward earnings multiple of 33, a sales multiple of 10 and a cash flow multiple of 23 -- 82%, 16%, 30% and 38% premiums to Internet software and services industry averages. Of analysts covering Akamai, seven, or 32%, rate its stock "buy", 14 rank it "hold" and one rates it "sell."

**Goldman Sachs**

(**GS**) - Get Goldman Sachs Group, Inc. Report

expects a rise of 14% to $60. On the other hand,

**Piper Jaffray**

(**PJC**) - Get Piper Jaffray Companies Report

forecasts a drop of 26% to $39.

6.

**Apollo Group**

(**APOL**)

runs various education programs in classrooms and online. Its stock has climbed 19% in Sept., but is still 15% below analysts' median target. Apollo's fiscal third-quarter profit dropped 11% to $179 million, or $1.16 a share, as revenue increased 28%. The operating margin remained steady at 33%. Apollo holds $1.4 billion of cash and $167 million of debt, converting to a quick ratio of 1.2 and a debt-to-equity ratio of 0.1.

The stock trades at a trailing earnings multiple of 12, a forward earnings multiple of 8.8 and a cash flow multiple of 7.7 -- 35%, 40% and 16% discounts to consumer services industry averages. Its PEG ratio of 0.3 signals a 70% discount to estimated fair value. Of researchers following Apollo, 13, or 59%, advise purchasing its shares and nine recommend holding them.

**Deutsche Bank**

(**DB**) - Get Deutsche Bank AG Report

predicts that Apollo's stock will advance another 47% to $75.

5.

**NetApp**

(**NTAP**) - Get NetApp, Inc. Report

sells storage and data management software to businesses. Its stock has climbed 23% in Sept., overshooting analysts' median target. Based on the consensus forecast, the shares could correct 10%. NetApp's fiscal first-quarter profit nearly tripled to $142 million, or 38 cents a share, as revenue gained 36% to $1.1 billion. The operating margin extended from 3.7% to 15%. NetApp has $3.9 billion of cash and $1.1 billion of debt.

The stock sells for a trailing earnings multiple of 36, a forward earnings multiple of 22, a book value multiple of 6.1 and a sales multiple of 4.1 -- 80%, 25%, 35% and 32% premiums to peer averages. Its PEG ratio of 0.5 reflects a 50% discount to estimated fair value. Of analysts covering NetApp, 21, or 51%, advocate purchasing its shares and 20 counsel holding. Even the most bullish price target for NetApp, at $50, suggests that the stock is fully valued.

4.

**J.C. Penney**

(**JCP**) - Get J. C. Penney Company, Inc. Report

operates a network of department stores in the U.S. and Puerto Rico. Its stock has returned 24% in Sept. Based on analysts' median target, the stock has 11% of upside. The company swung to a second-quarter profit of $14 million, or 6 cents a share, from a year-earlier loss. The operating margin rose from 1.5% to 2.2%. J.C. Penney holds $2 billion of cash and $3 billion of debt, converting to a debt-to-equity ratio of 0.6.

The stock trades at a forward earnings multiple of 14, a book value multiple of 1.2, a sales multiple of 0.3 and a cash flow multiple of 8.3 -- 20%, 51%, 47% and 46% discounts to multiline retail industry averages. Its PEG ratio of 0.6 suggests a 40% discount to fair value. Of researchers evaluating J.C. Penney, six recommend purchasing its shares, eight advise holding and one says to sell.

**Credit Suisse**

(**CS**) - Get Credit Suisse Group AG Report

values the stock at $32, implying 30% upside.

3.

**Expedia**

(**EXPE**) - Get Expedia Group, Inc. Report

is an online travel company. Its stock has jumped 25% in Sept. It is slightly above analysts' median target of $28.42. Expedia's second-quarter profit more than doubled to $114 million, or 40 cents a share, as revenue expanded 8.3% to $834 million. The operating margin declined from 25% to 23%. Expedia's balance sheet stores $1.1 billion of cash and $895 million of debt, converting to a quick ratio of 0.6 and a debt-to-equity ratio of 0.3.

Expedia's stock sells for a trailing earnings multiple of 21, a forward earnings multiple of 15, a book value multiple of 3.1 and a cash flow multiple of 11 -- 55%, 66%, 72% and 51% discounts to Internet and catalog retail peer averages. Of analysts covering Expedia, 11, or 55%, rate its stock "buy" and nine rank it "hold." None rate it "sell." The stock has overshot its median target. Still,

**Davenport & Co.**

believes that Expedia shares could climb another 18% to $34.

2.

**Oracle**

(**ORCL**) - Get Oracle Corporation Report

develops database, middleware, and application software and hardware. Its stock has rallied 26% in Sept., but could run another 13% based on analysts' median price target. Oracle's fiscal first-quarter profit increased 20% to $1.4 billion, or 27 cents a share, as revenue surged 48% to $7.5 billion. The operating margin dropped from 36% to 28%. Oracle holds $24 billion of cash and $17 billion of debt, converting to a debt-to-equity ratio of 0.5.

The stock trades at a forward earnings multiple of 13, a book value multiple of 4.3, a sales multiple of 4.7 and a cash flow multiple of 16 -- 52%, 19%, 60% and 17% discounts to software industry averages. The stock's PEG ratio of 0.4 reflects a 60% discount to estimated fair value. Of researchers following Oracle, 33, or 80%, advocate purchasing its shares, seven suggest holding and one says to sell. JPMorgan projects a return of 27% to $35.

1.

**JDS Uniphase**

(**JDSU**)

sells communications testing and measurement products to telecom, cable, and network equipment companies. Its stock has rallied 35% in Sept., but it has 20% more upside based on analysts' median price target. JDS swung to a second-quarter profit of $1.5 million, or 1 cent per share, from a year-earlier loss. The operating margin turned positive. JDS carries $272 million of debt, translating to a modest debt-to-equity ratio of 0.3.

JDS Uniphase's stock sells for a forward earnings multiple of 14 and a sales multiple of 2 -- 24% and 40% discounts to communications equipment industry averages. It's fairly valued based on book value and expensive when considering cash flow per share. Of analysts covering JDS Uniphase, nine, or 60%, advise purchasing its shares and six recommend holding. None rate the stock "sell."

**Citigroup**

(**C**) - Get Citigroup Inc. Report

predicts that the stock will gain another 41% to $17.50.

*-- Written by Jake Lynch in Boston.*

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