Today's Momo Momentum Stock To Watch: AbbVie (ABBV)

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

  • ABBV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $664.7 million.
  • ABBV has a PE ratio of 58.
  • ABBV is currently in the upper 30% of its 1-year range.
  • ABBV is in the upper 25% of its 20-day range.
  • ABBV is in the upper 35% of its 5-day range.
  • ABBV is currently trading above yesterday's high.
  • ABBV 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 ABBV:

AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The stock currently has a dividend yield of 3.1%. ABBV has a PE ratio of 58. Currently there are 8 analysts that rate AbbVie a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for AbbVie has been 11.5 million shares per day over the past 30 days. AbbVie has a market cap of $104.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.64 and a short float of 1.6% with 2.67 days to cover. Shares are up 1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AbbVie as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • ABBV's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, ABBVIE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Pharmaceuticals industry average, but is greater than that of the S&P 500. The net income increased by 4.3% when compared to the same quarter one year prior, going from $980.00 million to $1,022.00 million.
  • The debt-to-equity ratio is very high at 11.09 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, ABBV's quick ratio is somewhat strong at 1.11, demonstrating the ability to handle short-term liquidity needs.

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