Trade-Ideas: Taubman Centers (TCO) 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 Taubman Centers ( TCO) 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 Taubman Centers as such a stock due to the following factors:

  • TCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.2 million.
  • TCO has traded 107,434 shares today.
  • TCO traded in a range 202.2% of the normal price range with a price range of $2.18.
  • TCO traded above its daily resistance level (quality: 15 days, meaning that the stock is crossing a resistance level set by the last 15 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 TCO:

Taubman Centers, Inc. operates as a real estate investment trust. As of June 30, 2005, the company owned a 63% managing general partner's interest in The Taubman Realty Group Limited Partnership (the operating partnership). The stock currently has a dividend yield of 3.1%. TCO has a PE ratio of 9. Currently there is 1 analyst that rates Taubman Centers a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Taubman Centers has been 677,900 shares per day over the past 30 days. Taubman Centers has a market cap of $4.5 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.04 and a short float of 2% with 2.71 days to cover. Shares are down 4.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Taubman Centers as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 43.90% is the gross profit margin for TAUBMAN CENTERS INC which we consider to be strong. 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 24.24% trails the industry average.
  • The revenue fell significantly faster than the industry average of 8.5%. Since the same quarter one year prior, revenues fell by 21.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, TAUBMAN CENTERS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • TAUBMAN CENTERS INC 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, TAUBMAN CENTERS INC increased its bottom line by earning $13.46 versus $1.71 in the prior year. For the next year, the market is expecting a contraction of 86.0% in earnings ($1.89 versus $13.46).
  • In its most recent trading session, TCO 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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