Since June, shares of Physicians Realty Trust (DOC) have been in a sideways trading range and a rectangle pattern has formed.
DOC is a real estate investment trust in the U.S. healthcare sector. It acquires, develops and leases healthcare properties to physicians, hospitals, and healthcare delivery systems.
Since healthcare is an essential service, and its tenants lease medical offices for long periods of time, DOC has been able to withstand the stay at home protocols of the pandemic. It currently owns $5 billion worth of medical office real estate and has an addressable market of $250 billion to $300 billion.
DOC had long-term debt of $1.1 billion and cash of only $4 million as of the end of the last quarter, which is concerning. Its current ratio is also only 0.7. While its net profit margin is 21.3%, its return on equity is quite low at 3.3%.
The stock does have a strong history of revenue and earnings growth. In the second quarter, the company posted revenue of $109 million, which was up 15% year-over-year, and net income increased by 152% year over year. DOC is expected to report its latest financial results tomorrow before the market opens.
DOC has a fairly high P/E of 39.1, compared to the industry average of 28.7. Its Price to Sales Ratio of 8.6 is also quite high. The stock has shown strong near-term momentum, but its mid and long-term performance has been flat.
This has led to a “Neutral” Rating in our POWR Ratings system, though the stock has a grade of “A” in Peer Grade.
Take a look at the 1-year chart of DOC below with added notations:
Chart of DOC provided by TradingView
Like most stocks, DOC fell off a cliff in March, but also bottomed shortly after. Since that time, the stock has rallied up into a sideways trading range. While in the range, the stock has formed a resistance level at $19 (red), and an area of support at around $16.50 (green). At some point, the stock will have to either break the resistance or the support.
The possible long positions on the stock would be on a breakout above $19. The ideal short opportunity would be on a break below $16.50.
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DOC shares were trading at $18.09 per share on Thursday morning, up $0.15 (+0.84%). Year-to-date, DOC has gained 0.91%, versus a 10.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.
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