Today's Momo Momentum Stock Is Starbucks (SBUX)

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

  • SBUX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $347.0 million.
  • SBUX has a PE ratio of 3.
  • SBUX is currently in the upper 30% of its 1-year range.
  • SBUX is in the upper 25% of its 20-day range.
  • SBUX is in the upper 35% of its 5-day range.
  • SBUX is currently trading above yesterday's high.
  • SBUX 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 SBUX:

Starbucks Corporation operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates in four segments: Americas; Europe, Middle East, and Africa; China/Asia Pacific; and Channel Development. The stock currently has a dividend yield of 1.2%. SBUX has a PE ratio of 3. Currently there are 21 analysts that rate Starbucks a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Starbucks has been 8.1 million shares per day over the past 30 days. Starbucks has a market cap of $77.3 billion and is part of the services sector and leisure industry. The stock has a beta of 0.79 and a short float of 1% with 1.93 days to cover. Shares are up 25.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 17.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.51% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • STARBUCKS CORP has improved earnings per share by 17.9% 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, STARBUCKS CORP turned its bottom line around by earning $1.36 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($1.57 versus $1.36).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 15.9% when compared to the same quarter one year prior, going from $426.90 million to $494.90 million.
  • 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 Hotels, Restaurants & Leisure industry and the overall market, STARBUCKS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.

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