NEW YORK (TheStreet) -- Ryland Group (RYL) shares closed trading up 5.21% to $45.02 in intraday trading on Monday after the company announced that it was merging with fellow Southern California home builder Standard Pacific (SPF) .

The merger would create a company with a market cap of $5.2 billion, ranking it as the fourth largest home builder in the country.

As part of the terms of the deal, Standard Pacific will execute a 1-for-5 reverse stock split and then issue 1.091 common shares for each share Ryland stockholders own.

Standard Pacific shareholders would own about 59% of the new company following the merger.

Ryland CEO Larry Nicholson will run the newly formed company with Standard Pacific CEO Scott Stowell taking over as chairman of the board.

Standard Pacific shares closed trading up 5.62% to $8.83 today.

TheStreet Ratings team rates RYLAND GROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate RYLAND GROUP INC (RYL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, reasonable valuation levels, growth in earnings per share and increase in net income. 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 analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RYLAND GROUP INC has improved earnings per share by 11.9% 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, RYLAND GROUP INC reported lower earnings of $3.10 versus $6.81 in the prior year. This year, the market expects an improvement in earnings ($3.54 versus $3.10).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 12.4% when compared to the same quarter one year prior, going from $23.53 million to $26.46 million.
  • You can view the full analysis from the report here: RYL Ratings Report