Watch For Today's Momo Momentum Stock: Restoration Hardware Holdings (RH)

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 Restoration Hardware Holdings ( RH) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Restoration Hardware Holdings as such a stock due to the following factors:

  • RH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $185.6 million.
  • RH has a PE ratio of 51.4.
  • RH is currently in the upper 30% of its 1-year range.
  • RH is in the upper 25% of its 20-day range.
  • RH is in the upper 35% of its 5-day range.
  • RH is currently trading above yesterday's high.
  • RH 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 RH:

Restoration Hardware Holdings, Inc., together with its subsidiaries, is engaged in the retail of home furnishings. Its product categories include furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and children's furnishings. RH has a PE ratio of 51.4. Currently there are 10 analysts that rate Restoration Hardware Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Restoration Hardware Holdings has been 919,000 shares per day over the past 30 days. Restoration Hardware has a market cap of $3.8 billion and is part of the services sector and retail industry. The stock has a beta of 0.80 and a short float of 35.3% with 5.78 days to cover. Shares are up 41.3% 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 Restoration Hardware Holdings as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 22.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • RESTORATION HARDWARE HLDNGS reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, RESTORATION HARDWARE HLDNGS turned its bottom line around by earning $0.42 versus -$0.34 in the prior year. This year, the market expects an improvement in earnings ($2.35 versus $0.42).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 103.5% when compared to the same quarter one year prior, rising from $9.55 million to $19.43 million.
  • Net operating cash flow has significantly increased by 815.29% to $6.97 million when compared to the same quarter last year. In addition, RESTORATION HARDWARE HLDNGS has also vastly surpassed the industry average cash flow growth rate of -22.10%.
  • 39.08% is the gross profit margin for RESTORATION HARDWARE HLDNGS which we consider to be strong. 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 4.00% trails 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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