Equity Commonwealth (EQC) Marked As A Barbarian At The Gate

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 Equity Commonwealth ( EQC) 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 Equity Commonwealth as such a stock due to the following factors:

  • EQC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.9 million.
  • EQC has traded 294,231 shares today.
  • EQC traded in a range 200% of the normal price range with a price range of $0.73.
  • EQC traded above its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 EQC:

CommonWealth REIT is a real estate investment trust launched and managed by Reit Management & Research LLC. The fund invests in the real estate markets of the United States. It seeks to invest in office buildings, industrial buildings, and leased industrial land. Currently there are 2 analysts that rate Equity Commonwealth a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Equity Commonwealth has been 752,500 shares per day over the past 30 days. Equity Commonwealth has a market cap of $3.3 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.03 and a short float of 1% with 1.28 days to cover. Shares are down 0.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Equity Commonwealth as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • EQUITY COMMONWEALTH has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, EQUITY COMMONWEALTH continued to lose money by earning -$0.20 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.20).
  • EQC, with its decline in revenue, underperformed when compared the industry average of 9.8%. Since the same quarter one year prior, revenues slightly dropped by 6.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, EQUITY COMMONWEALTH's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, EQC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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 2891.2% when compared to the same quarter one year ago, falling from -$5.30 million to -$158.56 million.

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