DDR (DDR) Is Today's Roof Leaker Stock

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 DDR ( DDR) 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 DDR as such a stock due to the following factors:

  • DDR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.1 million.
  • DDR has traded 1.9 million shares today.
  • DDR is trading at 2.11 times the normal volume for the stock at this time of day.
  • DDR 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 DDR:

DDR Corp. is an equity real estate investment trust. It invests in the real estate markets of the United States and Puerto Rico. The firm is in the business of acquiring, owning, developing, redeveloping, expanding, leasing and managing shopping centers. The stock currently has a dividend yield of 3.6%. DDR has a PE ratio of 1706.0. Currently there are 12 analysts that rate DDR a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for DDR has been 2.2 million shares per day over the past 30 days. DDR has a market cap of $6.1 billion and is part of the financial sector and real estate industry. The stock has a beta of 1.29 and a short float of 6.2% with 4.85 days to cover. Shares are up 11.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DDR as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 21.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 426.1% when compared to the same quarter one year prior, rising from -$23.31 million to $76.02 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 DDR CORP is rather low; currently it is at 20.17%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 29.46% is above that of the industry average.
  • Net operating cash flow has declined marginally to $109.16 million or 0.96% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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