Watch Out: Barbarians At The Gate For Home Properties (HME)

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 Home Properties ( HME) 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 Home Properties as such a stock due to the following factors:

  • HME has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.0 million.
  • HME has traded 169,252 shares today.
  • HME traded in a range 205.6% of the normal price range with a price range of $2.19.
  • HME traded above its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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 HME:

Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The stock currently has a dividend yield of 4.1%. HME has a PE ratio of 33. Currently there are 3 analysts that rate Home Properties a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Home Properties has been 509,200 shares per day over the past 30 days. Home has a market cap of $4.3 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.13 and a short float of 3.8% with 4.25 days to cover. Shares are up 12% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Home Properties as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • 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. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 25.3% when compared to the same quarter one year prior, rising from $45.79 million to $57.36 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 6.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $89.97 million or 14.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.73%.

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