American Realty Capital Properties (ARCP) Marked As A Dead Cat Bounce 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 American Realty Capital Properties ( ARCP) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified American Realty Capital Properties as such a stock due to the following factors:

  • ARCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $452.5 million.
  • ARCP has traded 24.3 million shares today.
  • ARCP is up 3.1% today.
  • ARCP was down 11.5% yesterday.

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More details on ARCP:

American Realty Capital Properties, Inc. owns and acquires single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other creditworthy tenants. The company principally invests in retail and office properties. The stock currently has a dividend yield of 11.3%. Currently there are no analysts that rate American Realty Capital Properties a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for American Realty Capital Properties has been 16.1 million shares per day over the past 30 days. American has a market cap of $8.1 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.07 and a short float of 2.8% with 0.39 days to cover. Shares are down 38.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Realty Capital Properties as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • ARCP's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues leaped by 595.2%. 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 44.0% when compared to the same quarter one year prior, rising from -$71.96 million to -$40.33 million.
  • AMERICAN RLTY CAP PPTY 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, AMERICAN RLTY CAP PPTY INC reported poor results of -$2.34 versus -$0.47 in the prior year. This year, the market expects an improvement in earnings (-$0.59 versus -$2.34).
  • ARCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.91%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for AMERICAN RLTY CAP PPTY INC is currently extremely low, coming in at 6.89%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -10.55% significantly underperformed when compared to 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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