3 Stocks Pushing The Real Estate Industry Lower

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.

The Real Estate industry as a whole closed the day up 0.3% versus the S&P 500, which was down 0.2%. Laggards within the Real Estate industry included Institutional Financial Markets ( IFMI), down 1.5%, Power REIT ( PW), down 3.0%, Supertel Hospitality ( SPPR), down 12.9%, China HGS Real Estate ( HGSH), down 7.5% and Monroe Capital ( MRCC), down 2.0%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Monroe Capital ( MRCC) is one of the companies that pushed the Real Estate industry lower today. Monroe Capital was down $0.30 (2.0%) to $14.52 on light volume. Throughout the day, 45,753 shares of Monroe Capital exchanged hands as compared to its average daily volume of 70,000 shares. The stock ranged in price between $14.31-$14.77 after having opened the day at $14.77 as compared to the previous trading day's close of $14.82.

Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and, to a lesser extent, unsecured debt and equity investments in middle-market companies. The fund focuses on companies with a maximum of $25 million in EBITDA per year. Monroe Capital has a market cap of $176.4 million and is part of the services sector. Shares are up 2.5% year-to-date as of the close of trading on Thursday. Currently there are 8 analysts who rate Monroe Capital a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Monroe Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from TheStreet Ratings analysis on MRCC go as follows:

  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 24.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MONROE CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has declined marginally to -$15.10 million or 2.38% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, MONROE CAPITAL CORP has marginally lower results.

You can view the full analysis from the report here: Monroe Capital Ratings Report

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At the close, China HGS Real Estate ( HGSH) was down $0.16 (7.5%) to $1.97 on average volume. Throughout the day, 36,130 shares of China HGS Real Estate exchanged hands as compared to its average daily volume of 32,300 shares. The stock ranged in price between $1.83-$2.14 after having opened the day at $2.14 as compared to the previous trading day's close of $2.13.

China HGS Real Estate Inc., through its subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd, develops real estate properties in the People's Republic of China. The company engages in the construction and sale of residential apartments, parking lots, and commercial properties. China HGS Real Estate has a market cap of $96.4 million and is part of the services sector. Shares are down 50.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates China HGS Real Estate as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.

Highlights from TheStreet Ratings analysis on HGSH go as follows:

  • 48.58% is the gross profit margin for CHINA HGS REAL ESTATE 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 42.15% significantly outperformed against the industry average.
  • HGSH's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.10 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The share price of CHINA HGS REAL ESTATE INC has not done very well: it is down 12.26% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Real Estate Management & Development industry average. The net income has significantly decreased by 31.1% when compared to the same quarter one year ago, falling from $13.45 million to $9.27 million.

You can view the full analysis from the report here: China HGS Real Estate Ratings Report

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Supertel Hospitality ( SPPR) was another company that pushed the Real Estate industry lower today. Supertel Hospitality was down $0.26 (12.9%) to $1.75 on heavy volume. Throughout the day, 40,672 shares of Supertel Hospitality exchanged hands as compared to its average daily volume of 12,700 shares. The stock ranged in price between $1.46-$2.12 after having opened the day at $2.06 as compared to the previous trading day's close of $2.01.

Supertel Hospitality, Inc. is an independent equity real estate investment trust. The firm invests in the real estate markets of the United States. It primarily invests in limited-service hotels. The firm was formerly known as Humphrey Hospitality Trust, Inc. Supertel Hospitality, Inc. Supertel Hospitality has a market cap of $13.2 million and is part of the services sector. Shares are down 3.9% year-to-date as of the close of trading on Thursday.

TheStreet Ratings rates Supertel Hospitality as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

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Highlights from TheStreet Ratings analysis on SPPR go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, SUPERTEL HOSPITALITY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SUPERTEL HOSPITALITY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, SUPERTEL HOSPITALITY INC reported poor results of -$6.15 versus -$1.12 in the prior 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 728.8% when compared to the same quarter one year prior, rising from -$0.50 million to $3.17 million.
  • Net operating cash flow has significantly increased by 233.14% to $0.24 million when compared to the same quarter last year. In addition, SUPERTEL HOSPITALITY INC has also vastly surpassed the industry average cash flow growth rate of 2.10%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

You can view the full analysis from the report here: Supertel Hospitality Ratings Report

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