Trade-Ideas: Canadian Pacific Railway (CP) Is Today's 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 Canadian Pacific Railway ( CP) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Canadian Pacific Railway as such a stock due to the following factors:

  • CP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $150.0 million.
  • CP has a PE ratio of 36.2.
  • CP is currently in the upper 30% of its 1-year range.
  • CP is in the upper 25% of its 20-day range.
  • CP is in the upper 35% of its 5-day range.
  • CP is currently trading above yesterday's high.
  • CP has experienced a gap between today's open and yesterday's close of 0.6%.

'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 CP:

Canadian Pacific Railway Limited, through its subsidiaries, operates a transcontinental railway in Canada and the United States. The company provides logistics and supply chain expertise services. The stock currently has a dividend yield of 0.6%. CP has a PE ratio of 36.2. Currently there are 10 analysts that rate Canadian Pacific Railway a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Canadian Pacific Railway has been 945,400 shares per day over the past 30 days. Canadian Pacific Railway has a market cap of $34.8 billion and is part of the services sector and transportation industry. Shares are up 35.2% year-to-date as of the close of trading on Friday.

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 Canadian Pacific Railway as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • CANADIAN PACIFIC RAILWAY LTD has improved earnings per share by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CANADIAN PACIFIC RAILWAY LTD increased its bottom line by earning $4.98 versus $2.80 in the prior year. This year, the market expects an improvement in earnings ($8.40 versus $4.98).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Road & Rail industry average. The net income increased by 23.4% when compared to the same quarter one year prior, going from $324.00 million to $400.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 8.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 45.27% is the gross profit margin for CANADIAN PACIFIC RAILWAY LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.95% is above that of the industry average.
  • Net operating cash flow has slightly increased to $534.00 million or 5.95% when compared to the same quarter last year. Despite an increase in cash flow, CANADIAN PACIFIC RAILWAY LTD's cash flow growth rate is still lower than the industry average growth rate of 21.07%.

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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