New Lifetime High Reached By Red Hat (RHT)

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 Red Hat ( RHT) as a new lifetime high candidate. In addition to specific proprietary factors, Trade-Ideas identified Red Hat as such a stock due to the following factors:

  • RHT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $160.0 million.
  • RHT has traded 175,780 shares today.
  • RHT is trading at a new lifetime high.

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More details on RHT:

Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. It develops and offers operating system, virtualization, middleware, storage, and cloud technologies. RHT has a PE ratio of 61.3. Currently there are 17 analysts that rate Red Hat a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Red Hat has been 1.8 million shares per day over the past 30 days. Red Hat has a market cap of $10.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.65 and a short float of 5.4% with 3.55 days to cover. Shares are up 6.1% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. Analysis:

TheStreet Quant Ratings rates Red Hat as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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:
  • RED HAT INC has improved earnings per share by 19.0% 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, RED HAT INC increased its bottom line by earning $0.93 versus $0.77 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $0.93).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 14.7% when compared to the same quarter one year prior, going from $40.81 million to $46.82 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 27.3%. Since the same quarter one year prior, revenues rose by 19.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RHT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.58% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.


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