McKesson (MCK) 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.

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

  • MCK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $212.2 million.
  • MCK has a PE ratio of 30.5.
  • MCK is currently in the upper 30% of its 1-year range.
  • MCK is in the upper 25% of its 20-day range.
  • MCK is in the upper 35% of its 5-day range.
  • MCK is currently trading above yesterday's high.
  • MCK 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 MCK:

McKesson Corporation delivers pharmaceuticals, medical supplies, and health care information technologies to the healthcare industry in the United States and internationally. The company operates in two segments, McKesson Distribution Solutions and McKesson Technology Solutions. The stock currently has a dividend yield of 0.4%. MCK has a PE ratio of 30.5. Currently there are 14 analysts that rate McKesson a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for McKesson has been 936,900 shares per day over the past 30 days. McKesson has a market cap of $51.9 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.75 and a short float of 0.5% with 1.05 days to cover. Shares are up 7.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates McKesson as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, good cash flow from operations, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 18.9%. Since the same quarter one year prior, revenues rose by 36.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MCKESSON CORP 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 two years. We feel that this trend should continue. During the past fiscal year, MCKESSON CORP increased its bottom line by earning $5.92 versus $5.62 in the prior year. This year, the market expects an improvement in earnings ($10.92 versus $5.92).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 626.1% when compared to the same quarter one year prior, rising from $65.00 million to $472.00 million.
  • 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 Health Care Providers & Services industry and the overall market, MCKESSON CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 412.02% to $1,064.00 million when compared to the same quarter last year. In addition, MCKESSON CORP has also vastly surpassed the industry average cash flow growth rate of 54.82%.

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