Illumina (ILMN) Showing Signs Of Being A Momo Momentum Stock

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

  • ILMN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $334.8 million.
  • ILMN has a PE ratio of 180.0.
  • ILMN is currently in the upper 30% of its 1-year range.
  • ILMN is in the upper 25% of its 20-day range.
  • ILMN is in the upper 35% of its 5-day range.
  • ILMN is currently trading above yesterday's high.
  • ILMN has experienced a gap between today's open and yesterday's close of 6.7%.

'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 ILMN:

Illumina, Inc. develops, manufactures, and markets life science tools and integrated systems for the analysis of genetic variation and function in North America, Europe, Latin America, the Asia-Pacific, the Middle East, and South Africa. ILMN has a PE ratio of 180.0. Currently there are 7 analysts that rate Illumina a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Illumina has been 2.3 million shares per day over the past 30 days. Illumina has a market cap of $17.4 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.81 and a short float of 23.6% with 10.02 days to cover. Shares are up 27.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Illumina as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 25.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 4.36, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for ILLUMINA INC is currently very high, coming in at 75.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.82% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 60.80% to $126.84 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.27%.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 135.43% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.

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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