Charles Schwab (SCHW) Is Today's 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 Charles Schwab ( SCHW) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Charles Schwab as such a stock due to the following factors:

  • SCHW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $229.2 million.
  • SCHW has a PE ratio of 34.
  • SCHW is currently in the upper 30% of its 1-year range.
  • SCHW is in the upper 25% of its 20-day range.
  • SCHW is in the upper 35% of its 5-day range.
  • SCHW is currently trading above yesterday's high.
  • SCHW has experienced a gap between today's open and yesterday's close of 0.8%.

'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 SCHW:

The Charles Schwab Corporation, through its subsidiaries, provides wealth management, securities brokerage, banking, money management, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The stock currently has a dividend yield of 0.8%. SCHW has a PE ratio of 34. Currently there are 8 analysts that rate Charles Schwab a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Charles Schwab has been 6.7 million shares per day over the past 30 days. Charles Schwab has a market cap of $41.0 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.40 and a short float of 1.9% with 3.26 days to cover. Shares are up 5.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SCHWAB (CHARLES) CORP's earnings per share declined by 8.3% in the most recent quarter compared to 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, SCHWAB (CHARLES) CORP increased its bottom line by earning $0.96 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus $0.96).
  • 35.98% is the gross profit margin for SCHWAB (CHARLES) CORP which we consider to be strong. Regardless of SCHW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.47% trails the industry average.
  • 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. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.
  • Net operating cash flow has significantly decreased to -$1,305.00 million or 1991.30% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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