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

  • AVGO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $160.5 million.
  • AVGO has a PE ratio of 70.2.
  • AVGO is currently in the upper 30% of its 1-year range.
  • AVGO is in the upper 25% of its 20-day range.
  • AVGO is in the upper 35% of its 5-day range.
  • AVGO is currently trading above yesterday's high.
  • AVGO has experienced a gap between today's open and yesterday's close of 1.5%.

'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 AVGO:

Avago Technologies Limited is engaged in the design, development, and supply of analog semiconductor devices with a focus on III-V based products. The stock currently has a dividend yield of 1.4%. AVGO has a PE ratio of 70.2. Currently there are 15 analysts that rate Avago Technologies a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Avago Technologies has been 2.3 million shares per day over the past 30 days. Avago has a market cap of $23.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.41 and a short float of 1.6% with 1.84 days to cover. Shares are up 72% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Avago Technologies as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation.

Highlights from the ratings report include:
  • AVGO's very impressive revenue growth greatly exceeded the industry average of 18.6%. Since the same quarter one year prior, revenues leaped by 99.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 129.19% to $314.00 million when compared to the same quarter last year. In addition, AVAGO TECHNOLOGIES LTD has also vastly surpassed the industry average cash flow growth rate of 11.46%.
  • The gross profit margin for AVAGO TECHNOLOGIES LTD is rather high; currently it is at 61.38%. 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 -12.74% is in-line with the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 215.5% when compared to the same quarter one year ago, falling from $142.00 million to -$164.00 million.

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