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Trade-Ideas: Lennar Corporation (LEN) Is Today's Weak On High Relative Volume 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 or Stephanie Link.

Trade-Ideas LLC identified Lennar Corporation ( LEN) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Lennar Corporation as such a stock due to the following factors:

  • LEN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $205.5 million.
  • LEN has traded 639,117 shares today.
  • LEN is trading at 2.31 times the normal volume for the stock at this time of day.
  • LEN is trading at a new low 3.01% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in LEN with the Ticky from Trade-Ideas. See the FREE profile for LEN NOW at Trade-Ideas

More details on LEN:

Lennar Corporation, together with its subsidiaries, engages in homebuilding, financial services, and real estate businesses in the United States. The stock currently has a dividend yield of 0.5%. LEN has a PE ratio of 19.0. Currently there are 9 analysts that rate Lennar Corporation a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Lennar Corporation has been 6.2 million shares per day over the past 30 days. Lennar has a market cap of $5.6 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.73 and a short float of 22.8% with 4.91 days to cover. Shares are down 8.8% year to date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lennar Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • LEN's very impressive revenue growth greatly exceeded the industry average of 11.4%. Since the same quarter one year prior, revenues leaped by 53.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Even though the current debt-to-equity ratio is 1.43, it is still below the industry average, suggesting that this level of debt is acceptable within the Household Durables industry.
  • LENNAR CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LENNAR CORP increased its bottom line by earning $3.10 versus $0.48 in the prior year. For the next year, the market is expecting a contraction of 37.7% in earnings ($1.93 versus $3.10).
  • The gross profit margin for LENNAR CORP is rather low; currently it is at 24.07%. Regardless of LEN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LEN's net profit margin of 9.63% compares favorably to the industry average.

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