Digital Realty (DLR) Highlighted As 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 Digital Realty ( DLR) 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 Digital Realty as such a stock due to the following factors:

  • DLR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.7 million.
  • DLR has traded 1.1 million shares today.
  • DLR is trading at 2.45 times the normal volume for the stock at this time of day.
  • DLR 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 DLR:

Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. The stock currently has a dividend yield of 5.1%. DLR has a PE ratio of 45. Currently there are 6 analysts that rate Digital Realty a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Digital Realty has been 899,200 shares per day over the past 30 days. Digital has a market cap of $9.0 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.54 and a short float of 12.1% with 10.89 days to cover. Shares are up 0.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Digital Realty as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 161.8% when compared to the same quarter one year prior, rising from $45.91 million to $120.18 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 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 37.08% is the gross profit margin for DIGITAL REALTY TRUST INC which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 29.38% is above that of the industry average.
  • Net operating cash flow has increased to $138.92 million or 19.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.81%.

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