NEW YORK (TheStreet) -- Shares of American Realty Capital Properties Inc. (ARCP) closed down 5.84% to $8.87 after law firm Morgan & Morgan announced that a class-action lawsuit had been filed against the real estate investment trust in the Southern District of New York, and was brought on behalf of investors who purchased or otherwise acquired ARC securities between May 6, 2013, through October 29, 2014.
Morgan & Morgan, which specializes in securities fraud, alleges that throughout the class period, defendants made materially false and misleading statements regarding the company's business, operational and compliance policies.
On October 29, American Realty Capital Properties filed a Form 8-K with the SEC, and announced that certain of its previously issued financial statements contained errors and should no longer be relied upon.
Following this news, shares of American Realty fell over 36% on extremely heavy trading volume.
Separately, TheStreet Ratings team rates AMERICAN RLTY CAP PPTY INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICAN RLTY CAP PPTY INC (ARCP) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ARCP's very impressive revenue growth greatly exceeded the industry average of 12.2%. Since the same quarter one year prior, revenues leaped by 595.2%. Growth in the company's revenue appears to have helped boost 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 44.0% when compared to the same quarter one year prior, rising from -$71.96 million to -$40.33 million.
- AMERICAN RLTY CAP PPTY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AMERICAN RLTY CAP PPTY INC reported poor results of -$2.34 versus -$0.47 in the prior year. This year, the market expects an improvement in earnings (-$0.59 versus -$2.34).
- ARCP has underperformed the S&P 500 Index, declining 5.89% from its price level of one year ago. 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.
- The gross profit margin for AMERICAN RLTY CAP PPTY INC is currently extremely low, coming in at 6.89%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -10.55% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: ARCP Ratings Report