Trade-Ideas: New Residential Investment (NRZ) Is Today's "Barbarian At The Gate" Stock
Trade-Ideas LLC identified
(
) 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 New Residential Investment as such a stock due to the following factors:
- NRZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.4 million.
- NRZ has traded 3.1 million shares today.
- NRZ traded in a range 210.1% of the normal price range with a price range of $0.73.
- NRZ traded above its daily resistance level (quality: 14 days, meaning that the stock is crossing a resistance level set by the last 14 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 NRZ:
New Residential Investment Corp., a real estate investment trust (REIT), focuses on investing in and managing residential mortgage related assets. It operates through Servicing Related Assets, Residential Securities and Loans, and Other Investments segments. The stock currently has a dividend yield of 15.2%. NRZ has a PE ratio of 6. Currently there are 7 analysts that rate New Residential Investment a buy, no analysts rate it a sell, and none rate it a hold.
The average volume for New Residential Investment has been 2.4 million shares per day over the past 30 days. New Residential Investment has a market cap of $2.8 billion and is part of the financial sector and real estate industry. The stock has a beta of 1.28 and a short float of 6.7% with 3.27 days to cover. Shares are down 4.5% year-to-date as of the close of trading on Thursday.
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Analysis:
rates New Residential Investment as a
. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 56.9% when compared to the same quarter one year ago, falling from $126.37 million to $54.53 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, NEW RESIDENTIAL INV CP's return on equity is below that of both the industry average and the S&P 500.
- NEW RESIDENTIAL INV CP has experienced 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, NEW RESIDENTIAL INV CP increased its bottom line by earning $2.52 versus $1.96 in the prior year. For the next year, the market is expecting a contraction of 26.2% in earnings ($1.86 versus $2.52).
- After a year of stock price fluctuations, the net result is that NRZ's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- NRZ, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full New Residential Investment Ratings Report.
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