General Growth Properties (GGP) Showing Signs Of Being A Roof Leaker

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 General Growth Properties ( GGP) 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 General Growth Properties as such a stock due to the following factors:

  • GGP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $383.2 million.
  • GGP has traded 5.5 million shares today.
  • GGP is trading at 1.73 times the normal volume for the stock at this time of day.
  • GGP 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 GGP:

General Growth Properties, Inc is an equity real estate investment trust. The firm invests in the real estate markets of the United States. It engages in owning, managing, leasing, and redeveloping high-quality regional malls. The stock currently has a dividend yield of 2.6%. GGP has a PE ratio of 141.1. Currently there are 5 analysts that rate General Growth Properties a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for General Growth Properties has been 6.1 million shares per day over the past 30 days. General Growth has a market cap of $19.3 billion and is part of the financial sector and real estate industry. The stock has a beta of 1.39 and a short float of 1.5% with 0.36 days to cover. Shares are up 6.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates General Growth Properties as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • 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 113.2% when compared to the same quarter one year prior, rising from -$207.89 million to $27.48 million.
  • Net operating cash flow has increased to $292.32 million or 29.45% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.52%.
  • GENERAL GROWTH PPTYS 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, GENERAL GROWTH PPTYS INC reported poor results of -$0.52 versus -$0.23 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$0.52).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The gross profit margin for GENERAL GROWTH PPTYS INC is currently lower than what is desirable, coming in at 33.08%. Regardless of GGP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GGP's net profit margin of 4.34% is significantly lower than the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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