Roof Leaker To Watch: Essex Property (ESS)

Trade-Ideas LLC identified Essex Property ( ESS) 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 Essex Property as such a stock due to the following factors:

  • ESS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $75.3 million.
  • ESS has traded 69,397 shares today.
  • ESS is trading at 4.14 times the normal volume for the stock at this time of day.
  • ESS 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 ESS:

Essex Property Trust, Inc. operates as a self-administered and self-managed real estate investment trust in the United States. It engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities, as well as commercial properties. The stock currently has a dividend yield of 2.8%. ESS has a PE ratio of 65. Currently there are 11 analysts that rate Essex Property a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Essex Property has been 420,500 shares per day over the past 30 days. Essex Property has a market cap of $14.8 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.49 and a short float of 3.2% with 4.83 days to cover. Shares are down 5.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Essex Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • ESS's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 15.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ESSEX PROPERTY TRUST has improved earnings per share by 29.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ESSEX PROPERTY TRUST increased its bottom line by earning $3.49 versus $2.08 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus $3.49).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 34.9% when compared to the same quarter one year prior, rising from $60.68 million to $81.84 million.
  • Net operating cash flow has increased to $200.61 million or 23.41% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.95%.
  • 38.95% is the gross profit margin for ESSEX PROPERTY TRUST which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ESS's net profit margin of 24.46% significantly trails the industry average.

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