SL Green Realty (SLG) Is Today's Roof Leaker 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.

Trade-Ideas LLC identified SL Green Realty ( SLG) 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 SL Green Realty as such a stock due to the following factors:

  • SLG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $82.5 million.
  • SLG has traded 228,151 shares today.
  • SLG is trading at 15.03 times the normal volume for the stock at this time of day.
  • SLG 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 SLG:

SL Green Realty Corp. is a real estate investment trust (REIT). The firm engages in the property management, acquisitions, financing, development, construction, and leasing. It also provides tenant services to its clients. The firm invests in real estate markets of the United States. The stock currently has a dividend yield of 2%. SLG has a PE ratio of 56. Currently there are 6 analysts that rate SL Green Realty a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for SL Green Realty has been 965,500 shares per day over the past 30 days. SL Green has a market cap of $12.0 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.64 and a short float of 6.1% with 5.82 days to cover. Shares are up 0.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SL Green Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • SLG's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 8.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $90.96 million or 3.18% when compared to the same quarter last year. In addition, SL GREEN REALTY CORP has also modestly surpassed the industry average cash flow growth rate of 0.73%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • SL GREEN REALTY CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SL GREEN REALTY CORP increased its bottom line by earning $3.40 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 51.5% in earnings ($1.65 versus $3.40).
  • 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 68.6% when compared to the same quarter one year ago, falling from $149.83 million to $47.02 million.

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