Today's Momo Momentum Stock To Watch: Cardinal Health (CAH)

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

  • CAH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $150.6 million.
  • CAH has a PE ratio of 53.5.
  • CAH is currently in the upper 30% of its 1-year range.
  • CAH is in the upper 25% of its 20-day range.
  • CAH is in the upper 35% of its 5-day range.
  • CAH is currently trading above yesterday's high.
  • CAH has experienced a gap between today's open and yesterday's close of 2.2%.

'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 CAH:

Cardinal Health, Inc., a healthcare services company, provides pharmaceutical and medical products and services in the United States and internationally. The company operates in two segments, Pharmaceutical and Medical. The stock currently has a dividend yield of 2.3%. CAH has a PE ratio of 53.5. Currently there are 9 analysts that rate Cardinal Health a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Cardinal Health has been 1.9 million shares per day over the past 30 days. Cardinal Health has a market cap of $17.8 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.49 and a short float of 2.1% with 2.27 days to cover. Shares are up 27.2% year to date as of the close of trading on Friday.

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 Cardinal Health as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 380.63% to $300.00 million when compared to the same quarter last year. In addition, CARDINAL HEALTH INC has also modestly surpassed the industry average cash flow growth rate of 370.73%.
  • Compared to its closing price of one year ago, CAH's share price has jumped by 35.93%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that CAH's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
  • CARDINAL HEALTH INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CARDINAL HEALTH INC reported lower earnings of $0.95 versus $3.07 in the prior year. This year, the market expects an improvement in earnings ($3.57 versus $0.95).
  • CAH, with its decline in revenue, underperformed when compared the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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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