Today's Momo Momentum Stock To Watch: ASML (ASML)

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

  • ASML has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $177.4 million.
  • ASML is currently in the upper 30% of its 1-year range.
  • ASML is in the upper 25% of its 20-day range.
  • ASML is in the upper 35% of its 5-day range.
  • ASML is currently trading above yesterday's high.
  • ASML has experienced a gap between today's open and yesterday's close of 1%.

'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 ASML:

ASML Holding N.V. engages in the development, production, marketing, sale, and servicing of advanced semiconductor equipment systems with a focus on lithography related systems worldwide. The stock currently has a dividend yield of 0.6%. Currently there are 4 analysts that rate ASML a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for ASML has been 1.2 million shares per day over the past 30 days. ASML has a market cap of $45.8 billion and is part of the technology sector and electronics industry. Shares are down 1.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ASML as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, notable return on equity 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:
  • ASML's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
  • 48.05% is the gross profit margin for ASML HOLDING NV which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.39% is above that of the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, ASML HOLDING NV has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to its closing price of one year ago, ASML's share price has jumped by 31.51%, exceeding the performance of the broader market during that same time frame. 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.
  • ASML HOLDING NV has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ASML HOLDING NV increased its bottom line by earning $3.27 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.74 versus $3.27).

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