Baidu (BIDU) Showing Signs Of Being A Momo Momentum Stock

By Daniel Mirkin Follow07/14/14 – 10:13 AM EDT

Get TheStreet Quant Ratings’ exclusive 5-page report for (BIDU) now.

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 or Stephanie Link.

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

BIDU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $526.5 million.

BIDU has a PE ratio of 29.2.

BIDU is currently in the upper 30% of its 1-year range.

BIDU is in the upper 25% of its 20-day range.

BIDU is in the upper 35% of its 5-day range.

BIDU is currently trading above yesterday’s high.

BIDU 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 BIDU:

Baidu, Inc. provides Internet search services. BIDU has a PE ratio of 29.2. Currently there are 11 analysts that rate Baidu a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Baidu has been 3.4 million shares per day over the past 30 days. Baidu has a market cap of $64.2 billion and is part of the technology sector and internet industry. Shares are up 3.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Baidu as a buy. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

BIDU’s very impressive revenue growth greatly exceeded the industry average of 21.2%. Since the same quarter one year prior, revenues leaped by 59.0%. Growth in the company’s revenue appears to have helped boost the earnings per share.
BAIDU INC has improved earnings per share by 22.1% 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, BAIDU INC increased its bottom line by earning $4.96 versus $4.78 in the prior year. This year, the market expects an improvement in earnings ($33.48 versus $4.96).
The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Internet Software & Services industry average. The net income increased by 24.0% when compared to the same quarter one year prior, going from $328.92 million to $407.82 million.
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 96.21% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock’s sharp 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 other strengths this company displays justify these higher price levels.
Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company’s quick ratio of 3.56 is very high and demonstrates very strong liquidity.