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
) as a momo momentum 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 $233.8 million.
- RHT has a PE ratio of 64.7.
- RHT is currently in the upper 30% of its 1-year range.
- RHT is in the upper 25% of its 20-day range.
- RHT is in the upper 35% of its 5-day range.
- RHT is currently trading above yesterday's high.
- RHT has experienced a gap between today's open and yesterday's close of 0.8%.
'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 RHT with the Ticky from Trade-Ideas. See the FREE profile for RHT NOW at Trade-Ideas
More details on RHT:
Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. It develops and offers operating system, virtualization, middleware, storage, and cloud technologies. RHT has a PE ratio of 64.7. Currently there are 17 analysts that rate Red Hat a buy, no analysts rate it a sell, and 4 rate it a hold.
The average volume for Red Hat has been 1.9 million shares per day over the past 30 days. Red Hat has a market cap of $11.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.65 and a short float of 5.4% with 2.53 days to cover. Shares are up 21.4% year-to-date as of the close of trading on Friday.
rates Red Hat as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, 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:
- RHT's revenue growth trails the industry average of 26.3%. Since the same quarter one year prior, revenues rose by 15.0%. 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.
- Net operating cash flow has increased to $132.99 million or 39.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.17%.
- RED HAT 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, RED HAT INC increased its bottom line by earning $0.93 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $0.93).
- 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 Software industry and the overall market on the basis of return on equity, RED HAT INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to its closing price of one year ago, RHT's share price has jumped by 25.74%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full Red Hat Ratings Report.