Trade-Ideas: AvalonBay Communities (AVB) 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 AvalonBay Communities ( AVB) 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 AvalonBay Communities as such a stock due to the following factors:

  • AVB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $98.4 million.
  • AVB has traded 70,176 shares today.
  • AVB is trading at 2.80 times the normal volume for the stock at this time of day.
  • AVB 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 AVB:

AvalonBay Communities, Inc. engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. The stock currently has a dividend yield of 3%. AVB has a PE ratio of 3. Currently there are 8 analysts that rate AvalonBay Communities a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for AvalonBay Communities has been 723,200 shares per day over the past 30 days. AvalonBay has a market cap of $22.2 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.05 and a short float of 2.9% with 5.03 days to cover. Shares are up 1.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AvalonBay Communities as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, expanding profit margins, good cash flow from operations and compelling growth in net income. 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:
  • AVB's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 17.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 39.51% is the gross profit margin for AVALONBAY COMMUNITIES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.64% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $236.38 million or 7.29% when compared to the same quarter last year. In addition, AVALONBAY COMMUNITIES INC has also modestly surpassed the industry average cash flow growth rate of 0.73%.
  • 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 46.9% when compared to the same quarter one year prior, rising from $141.74 million to $208.14 million.

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