Today's Momo Momentum Stock To Watch: Broadcom (BRCM)

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

  • BRCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $336.5 million.
  • BRCM has a PE ratio of 4.
  • BRCM is currently in the upper 30% of its 1-year range.
  • BRCM is in the upper 25% of its 20-day range.
  • BRCM is in the upper 35% of its 5-day range.
  • BRCM is currently trading above yesterday's high.
  • BRCM 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 BRCM:

Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office, and mobile environments. The stock currently has a dividend yield of 1.2%. BRCM has a PE ratio of 4. Currently there are 21 analysts that rate Broadcom a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for Broadcom has been 6.3 million shares per day over the past 30 days. Broadcom has a market cap of $25.2 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.73 and a short float of 1.3% with 1.08 days to cover. Shares are up 6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Broadcom as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • BRCM's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • BRCM's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.13, which clearly demonstrates the ability to cover short-term cash needs.
  • BROADCOM CORP has improved earnings per share by 21.4% 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, BROADCOM CORP increased its bottom line by earning $1.08 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($3.03 versus $1.08).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 26.7% when compared to the same quarter one year prior, rising from $165.00 million to $209.00 million.
  • The gross profit margin for BROADCOM CORP is rather high; currently it is at 56.41%. 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 10.15% trails the industry average.

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