Roof Leaker To Watch: Simon Property Group (SPG)

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 Simon Property Group ( SPG) 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 Simon Property Group as such a stock due to the following factors:

  • SPG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $237.0 million.
  • SPG has traded 1.5 million shares today.
  • SPG is trading at 2.11 times the normal volume for the stock at this time of day.
  • SPG 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 SPG:

Simon Property Group, Inc. is an equity real estate investment trust. The firm invests in the real estate markets across the globe. It engages in investment, ownership, management, and development of properties. The stock currently has a dividend yield of 3%. SPG has a PE ratio of 40.0. Currently there are 15 analysts that rate Simon Property Group a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Simon Property Group has been 1.5 million shares per day over the past 30 days. Simon Property Group has a market cap of $57.3 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.28 and a short float of 1.8% with 4.07 days to cover. Shares are up 1.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Simon Property Group as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, notable return on equity and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • 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. 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.
  • SIMON PROPERTY GROUP INC has improved earnings per share by 17.2% 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. During the past fiscal year, SIMON PROPERTY GROUP INC increased its bottom line by earning $4.44 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($5.06 versus $4.44).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 5.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SIMON PROPERTY GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for SIMON PROPERTY GROUP INC is rather high; currently it is at 51.83%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 28.33% trails the industry average.

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