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

  • ILMN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $216.2 million.
  • ILMN has a PE ratio of 71.
  • ILMN is currently in the upper 30% of its 1-year range.
  • ILMN is in the upper 25% of its 20-day range.
  • ILMN is in the upper 35% of its 5-day range.
  • ILMN is currently trading above yesterday's high.
  • ILMN 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 ILMN:

Illumina, Inc. provides sequencing and array-based solutions for genetic analysis in North America, Europe, Latin America, the Asia-Pacific, the Middle East, and South Africa. ILMN has a PE ratio of 71. Currently there are 12 analysts that rate Illumina a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Illumina has been 1.2 million shares per day over the past 30 days. Illumina has a market cap of $29.6 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.30 and a short float of 2.3% with 3.68 days to cover. Shares are up 11.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Illumina as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 28.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, ILMN has a quick ratio of 2.42, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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. When compared to other companies in the Life Sciences Tools & Services industry and the overall market, ILLUMINA INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for ILLUMINA INC is currently very high, coming in at 75.22%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.37% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 80.06% to $66.78 million when compared to the same quarter last year. In addition, ILLUMINA INC has also vastly surpassed the industry average cash flow growth rate of -7.65%.

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