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5 Reasons to Add D.R. Horton (DHI) to Your Portfolio Now
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A thought that has been plaguing investors of late is whether a rise in interest rates will affect the housing market.
Despite the concern, homebuilding stocks continue to advance on healthy demand-supply balance, stronger economic growth, tight inventory, modest wage growth, low unemployment levels and positive consumer confidence.
Investors can also take advantage of near-term opportunities and cash in on any sudden surge in the homebuilding sector.
One of the major homebuilders in the run is D.R. Horton, Inc. (DHI - Free Report) . With a market cap of $12.27 billion, this company is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.
What’s Working in Favor of the Stock?
Stock Price Movement: D.R. Horton’s shares have increased 14.2% in the last three months, outperforming the Zacks categorized Building-Residential/Commercial industry’s growth of 10.1%. Going forward, continued double-digit annual growth in both revenues and pre-tax profits should drive the stock’s performance in the upcoming quarters.
Estimate Revisions: In the last 60 days, the Zacks Consensus Estimate for D.R. Horton increased 1.5% to $2.73 per share for 2017 and 2.1% to $2.98 per share for 2018. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #2 (Buy) for the stock. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Also, D.R. Horton beat earnings estimates in three of the last four quarters, the average being 6.27%. The company’s robust backlog position and well-stocked inventory of land, lots and homes should drive the stock’s performance in the upcoming quarters.
Compelling Valuation: D.R. Horton underperformed the broader construction sector over the last five years which suggests a value-oriented path ahead. We find the price-to-book ratio as the best multiple for valuing homebuilders because of their asset-driven nature.
The company currently has a trailing 12-month P/B ratio of 1.78. This level compares favorably to what the sector has witnessed over the period, as the current P/B for the sector is at 3.10. Hence, its lower-than-market positioning calls for more upside in the quarters ahead.
Solid ROE: D.R. Horton’s trailing 12-month Return on Equity (ROE) ratio is 14.1% compared with the industry average of 11%. This indicates that the company reinvests more efficiently as compared to its peer group.
Earnings Growth: D.R. Horton has a solid 3–5 year earnings per share growth rate of 10.46%. This earnings momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth of 15.6% for the current year and 9.3% for the next year.
Other Stocks that are Worth a Look
Investors may also consider stocks like NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) and Louisiana-Pacific Corporation (LPX - Free Report) , all with a Zacks Rank #1.
Full-year 2017 earnings for NVR are expected to increase 23.6% and that for Louisiana-Pacific 71.4%.
PulteGroup is expected to witness 32.1% growth in 2017 earnings.
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5 Reasons to Add D.R. Horton (DHI) to Your Portfolio Now
A thought that has been plaguing investors of late is whether a rise in interest rates will affect the housing market.
Despite the concern, homebuilding stocks continue to advance on healthy demand-supply balance, stronger economic growth, tight inventory, modest wage growth, low unemployment levels and positive consumer confidence.
Investors can also take advantage of near-term opportunities and cash in on any sudden surge in the homebuilding sector.
One of the major homebuilders in the run is D.R. Horton, Inc. (DHI - Free Report) . With a market cap of $12.27 billion, this company is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets.
What’s Working in Favor of the Stock?
Stock Price Movement: D.R. Horton’s shares have increased 14.2% in the last three months, outperforming the Zacks categorized Building-Residential/Commercial industry’s growth of 10.1%. Going forward, continued double-digit annual growth in both revenues and pre-tax profits should drive the stock’s performance in the upcoming quarters.
Estimate Revisions: In the last 60 days, the Zacks Consensus Estimate for D.R. Horton increased 1.5% to $2.73 per share for 2017 and 2.1% to $2.98 per share for 2018. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #2 (Buy) for the stock. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Also, D.R. Horton beat earnings estimates in three of the last four quarters, the average being 6.27%. The company’s robust backlog position and well-stocked inventory of land, lots and homes should drive the stock’s performance in the upcoming quarters.
Compelling Valuation: D.R. Horton underperformed the broader construction sector over the last five years which suggests a value-oriented path ahead. We find the price-to-book ratio as the best multiple for valuing homebuilders because of their asset-driven nature.
The company currently has a trailing 12-month P/B ratio of 1.78. This level compares favorably to what the sector has witnessed over the period, as the current P/B for the sector is at 3.10. Hence, its lower-than-market positioning calls for more upside in the quarters ahead.
Solid ROE: D.R. Horton’s trailing 12-month Return on Equity (ROE) ratio is 14.1% compared with the industry average of 11%. This indicates that the company reinvests more efficiently as compared to its peer group.
Earnings Growth: D.R. Horton has a solid 3–5 year earnings per share growth rate of 10.46%. This earnings momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth of 15.6% for the current year and 9.3% for the next year.
Other Stocks that are Worth a Look
Investors may also consider stocks like NVR, Inc. (NVR - Free Report) , PulteGroup, Inc. (PHM - Free Report) and Louisiana-Pacific Corporation (LPX - Free Report) , all with a Zacks Rank #1.
Full-year 2017 earnings for NVR are expected to increase 23.6% and that for Louisiana-Pacific 71.4%.
PulteGroup is expected to witness 32.1% growth in 2017 earnings.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>