Trade-Ideas LLC identified

Lennar

(

LEN

) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Lennar 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 $142.4 million.
  • LEN has traded 4.1 million shares today.
  • LEN is trading at 1.85 times the normal volume for the stock at this time of day.
  • LEN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on LEN:

TheStreet Recommends

Lennar Corporation, together with its subsidiaries, engages in the homebuilding activities in the United States. The stock currently has a dividend yield of 0.3%. LEN has a PE ratio of 17. Currently there are 5 analysts that rate Lennar a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Lennar has been 2.8 million shares per day over the past 30 days. Lennar has a market cap of $9.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.13 and a short float of 13.8% with 7.93 days to cover. Shares are up 11.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Lennar as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 12.9%. Since the same quarter one year prior, revenues rose by 32.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 29.50% and other important driving factors, this stock has surged by 39.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LEN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • LENNAR CORP has improved earnings per share by 29.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, LENNAR CORP increased its bottom line by earning $2.81 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.81).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Household Durables industry average. The net income increased by 32.9% when compared to the same quarter one year prior, rising from $137.72 million to $183.02 million.
  • Net operating cash flow has increased to -$264.27 million or 19.20% when compared to the same quarter last year. In addition, LENNAR CORP has also vastly surpassed the industry average cash flow growth rate of -99.75%.

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