Valeant Pharmaceuticals International (VRX) Showing Signs Of Being A 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 Valeant Pharmaceuticals International ( VRX) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Valeant Pharmaceuticals International as such a stock due to the following factors:

  • VRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $444.3 million.
  • VRX has a PE ratio of 92.6.
  • VRX is currently in the upper 30% of its 1-year range.
  • VRX is in the upper 25% of its 20-day range.
  • VRX is in the upper 35% of its 5-day range.
  • VRX is currently trading above yesterday's high.
  • VRX 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 VRX:

Valeant Pharmaceuticals International, Inc. develops, manufactures, and markets pharmaceuticals, over-the-counter (OTC) products, and medical devices in the areas of eye health, dermatology, and neurology therapeutic classes worldwide. VRX has a PE ratio of 92.6. Currently there are 9 analysts that rate Valeant Pharmaceuticals International a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Valeant Pharmaceuticals International has been 2.8 million shares per day over the past 30 days. Valeant Pharmaceuticals International has a market cap of $47.9 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.58 and a short float of 3.8% with 3.65 days to cover. Shares are up 23.3% 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 Valeant Pharmaceuticals International as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 33.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 128.3% when compared to the same quarter one year prior, rising from -$973.24 million to $275.40 million.
  • Net operating cash flow has significantly increased by 206.72% to $618.70 million when compared to the same quarter last year. In addition, VALEANT PHARMACEUTICALS INTL has also vastly surpassed the industry average cash flow growth rate of -19.65%.
  • The gross profit margin for VALEANT PHARMACEUTICALS INTL is currently very high, coming in at 75.57%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.39% trails the industry average.
  • Powered by its strong earnings growth of 127.73% and other important driving factors, this stock has surged by 33.89% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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