Today's Momo Momentum Stock Is Merck (MRK)

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 $533.1 million.
  • MRK has a PE ratio of 32.4.
  • 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 0.9%.

'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 32.4. Currently there are 6 analysts that rate Merck a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Merck has been 10.6 million shares per day over the past 30 days. Merck has a market cap of $170.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.54 and a short float of 0.8% with 2.56 days to cover. Shares are up 18.6% year-to-date as of the close of trading on Thursday.

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 Merck as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, expanding profit margins 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:
  • Compared to its closing price of one year ago, MRK's share price has jumped by 25.77%, exceeding the performance of the broader market during that same time frame. 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.
  • Net operating cash flow has increased to $4,348.00 million or 10.10% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.99%.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.7%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for MERCK & CO is currently very high, coming in at 77.97%. Regardless of MRK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MRK's net profit margin of 8.47% is significantly lower than the industry average.

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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