Today's Momo Momentum Stock To Watch: Omnicare (OCR)

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

  • OCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $188.2 million.
  • OCR has a PE ratio of 47.
  • OCR is currently in the upper 30% of its 1-year range.
  • OCR is in the upper 25% of its 20-day range.
  • OCR is in the upper 35% of its 5-day range.
  • OCR is currently trading above yesterday's high.
  • OCR 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 OCR:

Omnicare, Inc. operates as a healthcare services company that specializes in the management of pharmaceutical care in the United States. The stock currently has a dividend yield of 1%. OCR has a PE ratio of 47. Currently there are 5 analysts that rate Omnicare a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Omnicare has been 1.1 million shares per day over the past 30 days. Omnicare has a market cap of $8.7 billion and is part of the health care sector and health services industry. The stock has a beta of 0.65 and a short float of 5.8% with 3.13 days to cover. Shares are up 23.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Omnicare as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • OMNICARE INC has improved earnings per share by 27.1% 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, OMNICARE INC increased its bottom line by earning $1.73 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $1.73).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 21.3% when compared to the same quarter one year prior, going from $63.77 million to $77.39 million.
  • OCR's revenue growth trails the industry average of 18.5%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 89.44% to $336.26 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 68.02%.
  • Powered by its strong earnings growth of 27.11% and other important driving factors, this stock has surged by 49.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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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