Merck (MRK) On Momo Momentum Watch Today

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

  • MRK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $521.1 million.
  • MRK has a PE ratio of 31.3.
  • MRK is currently in the upper 30% of its 1-year range.
  • MRK is in the upper 25% of its 20-day range.
  • MRK is in the upper 35% of its 5-day range.
  • MRK is currently trading above yesterday's high.
  • MRK has experienced a gap between today's open and yesterday's close of 0.7%.

'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 MRK:

Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products worldwide. The stock currently has a dividend yield of 3%. MRK has a PE ratio of 31.3. Currently there are 6 analysts that rate Merck a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Merck has been 8.1 million shares per day over the past 30 days. Merck has a market cap of $171.7 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.45 and a short float of 1% with 3.13 days to cover. Shares are up 19.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Merck as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 121.2% when compared to the same quarter one year prior, rising from $906.00 million to $2,004.00 million.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
  • MERCK & CO reported significant earnings per share improvement in the most recent quarter compared to 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, MERCK & CO reported lower earnings of $1.46 versus $2.00 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $1.46).

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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