Trade-Ideas: American Realty Capital Properties (ARCP) Is Today's

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.

Trade-Ideas LLC identified American Realty Capital Properties ( ARCP) 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 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 $49.7 million.
  • ARCP has traded 1.4 million shares today.
  • ARCP traded in a range 201.3% of the normal price range with a price range of $0.34.
  • ARCP traded above its daily resistance level (quality: 10 days, meaning that the stock is crossing a resistance level set by the last 10 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 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%. Currently there is 1 analyst that rates American Realty Capital Properties a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for American Realty Capital Properties has been 9.5 million shares per day over the past 30 days. American has a market cap of $8.2 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.19 and a short float of 5.5% with 8.18 days to cover. Shares are up 0.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Realty Capital Properties as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 77.2% when compared to the same quarter one year ago, falling from -$197.82 million to -$350.62 million.
  • 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 30.67%, 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 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 Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 916.95% to $237.74 million when compared to the same quarter last year. In addition, AMERICAN RLTY CAP PPTY INC has also vastly surpassed the industry average cash flow growth rate of 11.50%.
  • AMERICAN RLTY CAP PPTY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN RLTY CAP PPTY INC continued to lose money by earning -$1.44 versus -$2.44 in the prior year. This year, the market expects an improvement in earnings (-$0.04 versus -$1.44).

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