Barbarian At The Gate: Health Care REIT (HCN)

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 Health Care REIT ( HCN) 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 Health Care REIT as such a stock due to the following factors:

  • HCN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $108.5 million.
  • HCN has traded 55,476 shares today.
  • HCN traded in a range 200.2% of the normal price range with a price range of $1.23.
  • HCN traded above its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 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 HCN:

Health Care REIT, Inc. is an independent equity real estate investment trust. The firm engages in acquiring, planning, developing, managing, repositioning and monetizing of real estate assets. It primarily invests in the real estate markets of the United States. The stock currently has a dividend yield of 4.9%. HCN has a PE ratio of 169.4. Currently there are 6 analysts that rate Health Care REIT a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for Health Care REIT has been 2.2 million shares per day over the past 30 days. Health Care REIT has a market cap of $18.8 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.44 and a short float of 4.3% with 6.35 days to cover. Shares are up 19.5% year-to-date as of the close of trading on Wednesday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Health Care REIT as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 26.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $258.66 million or 29.45% when compared to the same quarter last year. In addition, HEALTH CARE REIT INC has also vastly surpassed the industry average cash flow growth rate of -37.20%.
  • HEALTH CARE REIT 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, HEALTH CARE REIT INC reported lower earnings of $0.09 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.84 versus $0.09).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HEALTH CARE REIT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for HEALTH CARE REIT INC is rather low; currently it is at 23.57%. Regardless of HCN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HCN's net profit margin of 8.33% 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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