PulteGroup (PHM) Is Today's Storm The Castle 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 PulteGroup ( PHM) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified PulteGroup as such a stock due to the following factors:

  • PHM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.3 million.
  • PHM has traded 836,114 shares today.
  • PHM is trading at 1.62 times the normal volume for the stock at this time of day.
  • PHM crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on PHM:

PulteGroup, Inc., through its subsidiaries, engages in the homebuilding business; mortgage banking operations; and title operations in the United States. The stock currently has a dividend yield of 1.6%. PHM has a PE ratio of 16. Currently there are 5 analysts that rate PulteGroup a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for PulteGroup has been 5.4 million shares per day over the past 30 days. PulteGroup has a market cap of $7.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.76 and a short float of 3.8% with 3.10 days to cover. Shares are down 5.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PulteGroup as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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 current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels.
  • PULTEGROUP INC's earnings per share declined by 21.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PULTEGROUP INC reported lower earnings of $1.25 versus $6.74 in the prior year. This year, the market expects an improvement in earnings ($1.30 versus $1.25).
  • In its most recent trading session, PHM 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. 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.

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