Watch For Today's Momo Momentum Stock: Eli Lilly And (LLY)

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.

Trade-Ideas LLC identified Eli Lilly and ( LLY) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Eli Lilly and as such a stock due to the following factors:

  • LLY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $336.2 million.
  • LLY has a PE ratio of 30.6.
  • LLY is currently in the upper 30% of its 1-year range.
  • LLY is in the upper 25% of its 20-day range.
  • LLY is in the upper 35% of its 5-day range.
  • LLY is currently trading above yesterday's high.
  • LLY has experienced a gap between today's open and yesterday's close of 0.5%.

'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 LLY:

Eli Lilly and Company discovers, develops, manufactures, and sells pharmaceutical products worldwide. It operates in two segments, Human Pharmaceutical Products and Animal Health products. The stock currently has a dividend yield of 2.8%. LLY has a PE ratio of 30.6. Currently there are 6 analysts that rate Eli Lilly and a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Eli Lilly and has been 4.3 million shares per day over the past 30 days. Eli Lilly and has a market cap of $80.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.38 and a short float of 2.2% with 4.34 days to cover. Shares are up 4.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Eli Lilly and as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite the weak revenue results, LLY has outperformed against the industry average of 11.1%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 75.69%. Regardless of LLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LLY's net profit margin of 11.40% is significantly lower than the industry average.
  • LILLY (ELI) & CO's earnings per share declined by 26.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LILLY (ELI) & CO reported lower earnings of $2.23 versus $4.31 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.23).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Pharmaceuticals industry average. The net income has significantly decreased by 27.3% when compared to the same quarter one year ago, falling from $727.90 million to $529.50 million.

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