Cramer: Celgene (CELG), Salesforce.com (CRM) Could Grow in Second Quarter

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says investors need to see money return to the highest-growth names, which have had a shrinking price-to-earnings multiple, as the market moves from the first quarter into the second quarter.

Cramer brings up the example of Celgene  (CELG), which has been mostly in decline from the $170 range to the $130 range. But he believes this company could have $15 to $16 in earnings power in just a couple of years and is cheaper than Merck  (MRK) and Pfizer (PFE).

Cramer also suggests investors keep an eye on Salesforce.com (CRM), which has had a shrinking multiple since it reported solid quarterly results. If these stocks turn around, then Cramer says money will flow back into the highest growth out of the best value.

Must Watch: Jim Cramer Says Watch Celgene, Salesforce.com for Growth in Q2

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Separately, TheStreet Ratings team rates CELGENE CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CELGENE CORP (CELG) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CELG's revenue growth has slightly outpaced the industry average of 14.9%. Since the same quarter one year prior, revenues rose by 21.3%. 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.
  • 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 Biotechnology industry and the overall market, CELGENE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for CELGENE CORP is currently very high, coming in at 96.51%. 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 12.21% trails the industry average.
  • Net operating cash flow has increased to $550.70 million or 12.29% when compared to the same quarter last year. Despite an increase in cash flow of 12.29%, CELGENE CORP is still growing at a significantly lower rate than the industry average of 64.51%.
  • You can view the full analysis from the report here: CELG Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates SALESFORCE.COM INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.9%. Since the same quarter one year prior, revenues rose by 37.2%. 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.
  • Compared to its closing price of one year ago, CRM's share price has jumped by 27.29%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SALESFORCE.COM 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. 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, SALESFORCE.COM INC continued to lose money by earning -$0.40 versus -$0.48 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.40).
  • CRM's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.57 is low and demonstrates weak liquidity.
  • 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 Software industry. The net income has significantly decreased by 459.5% when compared to the same quarter one year ago, falling from -$20.84 million to -$116.62 million.
  • You can view the full analysis from the report here: CRM Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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