Trade-Ideas LLC identified

Dollar Tree Stores

(

DLTR

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

  • DLTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $198.9 million.
  • DLTR has a PE ratio of 63.
  • DLTR is currently in the upper 30% of its 1-year range.
  • DLTR is in the upper 25% of its 20-day range.
  • DLTR is in the upper 35% of its 5-day range.
  • DLTR is currently trading above yesterday's high.
  • DLTR 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.

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TST Recommends

More details on DLTR:

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise at the fixed price of $1.00. DLTR has a PE ratio of 63. Currently there are 11 analysts that rate Dollar Tree Stores a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Dollar Tree Stores has been 3.0 million shares per day over the past 30 days. Dollar Tree Stores has a market cap of $18.3 billion and is part of the services sector and retail industry. The stock has a beta of 0.58 and a short float of 6.2% with 5.62 days to cover. Shares are up 2.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Dollar Tree Stores as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • DLTR's very impressive revenue growth greatly exceeded the industry average of 15.2%. Since the same quarter one year prior, revenues leaped by 136.0%. 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.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • DOLLAR TREE INC's earnings per share declined by 45.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DOLLAR TREE INC increased its bottom line by earning $2.90 versus $2.75 in the prior year. For the next year, the market is expecting a contraction of 10.7% in earnings ($2.59 versus $2.90).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Multiline Retail industry. The net income has significantly decreased by 38.4% when compared to the same quarter one year ago, falling from $133.00 million to $81.90 million.
  • The debt-to-equity ratio is very high at 2.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, DLTR has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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