HCP (HCP) Marked As 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 HCP ( HCP) 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 HCP as such a stock due to the following factors:

  • HCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $108.7 million.
  • HCP has traded 1.3 million shares today.
  • HCP is trading at 1.65 times the normal volume for the stock at this time of day.
  • HCP 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 HCP:

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The stock currently has a dividend yield of 5.4%. HCP has a PE ratio of 20.4. Currently there are 4 analysts that rate HCP a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for HCP has been 2.0 million shares per day over the past 30 days. HCP has a market cap of $18.6 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 2.7% with 4.14 days to cover. Shares are up 12.2% year-to-date as of the close of trading on Tuesday.

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 HCP as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, growth in earnings per share, expanding profit margins and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 2.6% when compared to the same quarter one year prior, going from $213.40 million to $218.89 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HCP INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HCP INC increased its bottom line by earning $1.98 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($2.02 versus $1.98).
  • The gross profit margin for HCP INC is rather high; currently it is at 59.87%. Regardless of HCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCP's net profit margin of 39.73% significantly outperformed against the industry.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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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