Watch For Today's Momo Momentum Stock: VMware (VMW)

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

  • VMW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $184.9 million.
  • VMW has a PE ratio of 42.7.
  • VMW is currently in the upper 30% of its 1-year range.
  • VMW is in the upper 25% of its 20-day range.
  • VMW is in the upper 35% of its 5-day range.
  • VMW is currently trading above yesterday's high.
  • VMW 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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More details on VMW:

VMware, Inc. provides virtualization infrastructure solutions in the United States and internationally. VMW has a PE ratio of 42.7. Currently there are 15 analysts that rate VMware a buy, 2 analysts rate it a sell, and 12 rate it a hold.

The average volume for VMware has been 2.2 million shares per day over the past 30 days. VMware has a market cap of $11.4 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.54 and a short float of 15.5% with 6.41 days to cover. Shares are down 7.2% year-to-date as of the close of trading on Thursday.

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 VMware as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • VMW's revenue growth has slightly outpaced the industry average of 6.2%. Since the same quarter one year prior, revenues rose by 13.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VMW's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for VMWARE INC is currently very high, coming in at 90.44%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 20.26% trails the industry average.
  • 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. When compared to other companies in the Software industry and the overall market, VMWARE INC's return on equity is below that of both the industry average and the S&P 500.
  • VMW has underperformed the S&P 500 Index, declining 5.99% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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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