Today's Momo Momentum Stock To Watch: Electronic Arts (EA)

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

  • EA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $173.3 million.
  • EA has a PE ratio of 34.3.
  • EA is currently in the upper 30% of its 1-year range.
  • EA is in the upper 25% of its 20-day range.
  • EA is in the upper 35% of its 5-day range.
  • EA is currently trading above yesterday's high.
  • EA has experienced a gap between today's open and yesterday's close of 1.2%.

'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 EA:

Electronic Arts Inc. develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, and tablets. The company operates through EA Games, EA SPORTS, Maxis, PopCap, and All Play segments. EA has a PE ratio of 34.3. Currently there are 11 analysts that rate Electronic Arts a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Electronic Arts has been 3.3 million shares per day over the past 30 days. Electronic Arts has a market cap of $13.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.61 and a short float of 5.2% with 3.47 days to cover. Shares are up 89.4% year-to-date as of the close of trading on Wednesday.

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 Electronic Arts as a buy. 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, solid stock price performance, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 28.1%. Since the same quarter one year prior, revenues rose by 42.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • EA's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
  • Powered by its strong earnings growth of 101.12% and other important driving factors, this stock has surged by 56.88% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in 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 Software industry. The net income increased by 101.1% when compared to the same quarter one year prior, rising from -$273.00 million to $3.00 million.
  • Net operating cash flow has significantly increased by 3150.00% to $183.00 million when compared to the same quarter last year. In addition, ELECTRONIC ARTS INC has also vastly surpassed the industry average cash flow growth rate of 12.01%.

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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