Trade-Ideas LLC identified SouFun Holdings ( SFUN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified SouFun Holdings as such a stock due to the following factors:

  • SFUN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.9 million.
  • SFUN has traded 2.1 million shares today.
  • SFUN is trading at 3.41 times the normal volume for the stock at this time of day.
  • SFUN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on SFUN:

SouFun Holdings Limited operates a real estate Internet portal, and home furnishing and improvement Websites in the People's Republic of China. The stock currently has a dividend yield of 5%. SFUN has a PE ratio of 3. Currently there are 3 analysts that rate SouFun Holdings a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SouFun Holdings has been 6.1 million shares per day over the past 30 days. SouFun has a market cap of $3.2 billion and is part of the technology sector and internet industry. Shares are up 0.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SouFun Holdings 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, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 25.4%. 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.
  • SFUN's debt-to-equity ratio of 0.98 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that SFUN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.70 is high and demonstrates strong liquidity.
  • The gross profit margin for SOUFUN HLDGS LTD is rather high; currently it is at 51.84%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SFUN's net profit margin of 7.66% is significantly lower than the industry average.
  • 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 Internet Software & Services industry and the overall market, SOUFUN HLDGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The share price of SOUFUN HLDGS LTD has not done very well: it is down 8.02% 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. 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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