Water-Logged And Getting Wetter Stock Of The Day: HCP (HCP)

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 HCP ( HCP) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified HCP as such a stock due to the following factors:

  • HCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $135.6 million.
  • HCP has traded 943,554 shares today.
  • HCP traded in a range 209.7% of the normal price range with a price range of $1.29.
  • HCP traded below its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on HCP:

HCP, Inc. is an independent hybrid real estate investment trust. The fund invests in real estate markets of the United States. The stock currently has a dividend yield of 5.9%. HCP has a PE ratio of 41. Currently there are 3 analysts that rate HCP a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for HCP has been 3.2 million shares per day over the past 30 days. HCP has a market cap of $17.6 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.09 and a short float of 3.8% with 4.21 days to cover. Shares are down 13.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates HCP as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • HCP's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues rose by 14.7%. 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.
  • The gross profit margin for HCP INC is rather high; currently it is at 56.55%. Regardless of HCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCP's net profit margin of -38.53% significantly underperformed when compared to the industry average.
  • 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 on the basis of return on equity, HCP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has declined marginally to $230.07 million or 6.92% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, HCP INC has marginally lower results.

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