PulteGroup (PHM) Showing Signs Of Being Water-Logged And Getting Wetter

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 PulteGroup ( PHM) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified PulteGroup as such a stock due to the following factors:

  • PHM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.6 million.
  • PHM has traded 2.7 million shares today.
  • PHM traded in a range 206.3% of the normal price range with a price range of $0.65.
  • PHM traded below its daily resistance level (quality: 18 days, meaning that the stock is crossing a resistance level set by the last 18 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on PHM:

PulteGroup, Inc., through its subsidiaries, engages in homebuilding and financial services businesses primarily in the United States. The stock currently has a dividend yield of 1%. PHM has a PE ratio of 2.9. Currently there are 7 analysts that rate PulteGroup a buy, 3 analysts rate it a sell, and 3 rate it a hold.

The average volume for PulteGroup has been 5.2 million shares per day over the past 30 days. PulteGroup has a market cap of $7.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.94 and a short float of 5.4% with 4.73 days to cover. Shares are down 7.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PulteGroup as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • PHM's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, PULTEGROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Household Durables industry average. The net income increased by 15.0% when compared to the same quarter one year prior, going from $36.42 million to $41.88 million.

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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