Trade-Ideas: Red Hat (RHT) Is Today's Post-Market Leader 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 Red Hat ( RHT) as a post-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified Red Hat as such a stock due to the following factors:

  • RHT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.6 million.
  • RHT is up 3% today from today's close.

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More details on RHT:

Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. It develops and offers operating system, virtualization, middleware, storage, and cloud technologies. RHT has a PE ratio of 64.9. Currently there are 17 analysts that rate Red Hat a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Red Hat has been 1.1 million shares per day over the past 30 days. Red Hat has a market cap of $11.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.18 and a short float of 2.5% with 6.17 days to cover. Shares are up 8.4% year-to-date as of the close of trading on Tuesday.

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 Red Hat as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • RHT's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 16.6%. 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.
  • RED HAT INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, RED HAT INC increased its bottom line by earning $0.93 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $0.93).
  • The gross profit margin for RED HAT INC is currently very high, coming in at 88.32%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RHT's net profit margin of 8.90% significantly trails the industry average.
  • Net operating cash flow has increased to $164.69 million or 16.12% when compared to the same quarter last year. Despite an increase in cash flow, RED HAT INC's cash flow growth rate is still lower than the industry average growth rate of 42.54%.
  • RHT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.

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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