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Trade-Ideas: Realty Income Corporation (O) Is Today's "Barbarian At The Gate" Stock

Stocks in this article: O

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 Realty Income Corporation ( O) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Realty Income Corporation as such a stock due to the following factors:

  • O has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $159.1 million.
  • O has traded 2.2 million shares today.
  • O traded in a range 293.4% of the normal price range with a price range of $2.15.
  • O traded above its daily resistance level (quality: 12 days, meaning that the stock is crossing a resistance level set by the last 12 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on O:

Realty Income Corporation is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. Realty Income Corporation was founded in 1969 and is based in Escondido, California. The stock currently has a dividend yield of 5.2%. O has a PE ratio of 59.5. Currently there are 5 analysts that rate Realty Income Corporation a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Realty Income Corporation has been 2.4 million shares per day over the past 30 days. Realty Income has a market cap of $8.5 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.54 and a short float of 16.7% with 6.73 days to cover. Shares are up 9.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Realty Income Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • O's very impressive revenue growth greatly exceeded the industry average of 6.9%. Since the same quarter one year prior, revenues leaped by 62.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 64.9% when compared to the same quarter one year prior, rising from $39.02 million to $64.34 million.
  • Net operating cash flow has increased to $173.24 million or 46.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.91%.
  • REALTY INCOME CORP has improved earnings per share by 11.8% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, REALTY INCOME CORP reported lower earnings of $0.71 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.71).
  • 46.77% is the gross profit margin for REALTY INCOME CORP which we consider to be strong. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, O's net profit margin of 29.82% compares favorably to the industry average.

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