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Momentum

Keynote Systems, Inc. (KEYN) has seen big gains over the last 12 months, recently hitting a new all-time high after reporting strong Q3 results that included a hefty 25% earnings surprise. With an average earnings surprise of 40% over the last four quarters and estimates on the rise, this Zacks #1 Rank stock is floating with momentum.

Company Description

Keynote Systems, Inc provides Internet and mobile cloud monitoring solutions worldwide. The company was founded in 1995 and has a market cap of $350 million.

With Keynote growing its presence in the very hot cloud computing space, demand for the company's services has been surging. That showed up in its strong Q3 results from late July that came in well ahead of expectations.

Third-Quarter Results

Revenue for the period was a record, up 25% from last year to $26.6 million. Earnings also looked great, coming in at 25 cents, 25% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 40% over the last three quarters.

The company is divided into two major segments, Mobile and Internet, with each side generating about 50% of total revenue. But the good quarter was driven by sharp gains in Mobile, with revenue up 67% from last year to $13.4 million.

Pristine Balance Sheet

Keynote also has a pristine balance sheet, with cash and short-term investments up 53% from last year to $92 million against no long-term debt.

Estimates

We saw some pretty solid movement in estimates off the good quarter, with the current year adding 12% to $1.01.

Valuation

But in spite of the gains, the valuation for a technology and cloud stocks looks reasonable, with its forward P/E of 21X in line with its peers.

12-Month Chart

On the chart, KEYN recently jumped into a new multi-year high on the good quarter before pulling back a bit with the market. Look for support from the long-term trend. Take a look below.

This Week's Momentum Zacks Rank Buy Stocks

Heartland Payment Systems, Inc. (HPY) has been a top performer in 2011, gaining more than 25% in spite of recently pulling back with the market. With a strong Q2 results in hand and rising estimates, this Zacks #1 Rank stock offers plenty of momentum. Read Full Article.

Changyou.com Ltd (CYOU) has seen big gains in 2011, recently hitting a new all-time high after reporting another strong quarter. With estimate son the rise and a bullish growth projection, this Zacks #1 Rank stock isn't playing games with momentum. Read Full Article.

Hansen Natural Corp. (HANS) has produced big gains in 2011, recently rebounding from a small pull back to move back within striking distance of the all-time high. With estimates on the rise and a bullish growth projection, this Zacks #1 Rank stock offers a refreshing take on momentum. Read Full Article.

MarketAxess Holdings, Inc. (MKTX) has seen big gains over the last year, more than doubling in price after recently hitting a new all-time high. The movement comes on the heels of strong Q2 results and upward revisions in estimates, providing more momentum for this Zacks #1 Rank stock. Read Full Article.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.

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