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Here's Why You Should Add NVR Stock to Your Portfolio Now
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The housing market has of late been going strong, courtesy of steady job growth and gradual economic recovery. U.S. homebuilders' sales outlook has become more optimistic on the recent rise in homebuilder sentiment. The National Association of Home Builders/Wells Fargo builder sentiment index touched an eight-month high of 70 in November — the second highest since recession.
One such company cashing in on the favorable backdrop is NVR, Inc. (NVR - Free Report) . The company is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings.
So far this year, NVR’s shares have skyrocketed 101.9%, outperforming the industry’s 62.4% rally. Also, the company outperformed the industry in all the other time frames we considered – 4-week, 12-week and 52-week.
In fact, the Zacks Consensus Estimates for current-year and next-year earnings have moved north by 6.4% and 12.3%, respectively, in the last 60 days. This bullish analysts’ sentiment justifies the stock’s current Zacks Rank #2 (Buy) and why we are expecting the company to outperform in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Makes NVR a Solid Pick?
Solid Business Model & Stellar Performance: NVR’s solid performance was largely owing to its disciplined business model, focus on maximizing liquidity and minimizing risk. Furthermore, the company’s sole business include selling and building quality homes by typically acquiring finished building lots, without the risk of owning and developing land in a cyclical industry.
Homebuilding revenues increased 10.1% year over year in the first three quarters of 2017, primarily on a 7.8% year-over-year increase in the number of settled units. The improvement in the number of settled units was attributable to a 15.6% year-over-year hike in backlog unit balance as of Sep 30, 2017. Potential housing revenues from backlog increased 15% to $3.42 billion.
Also, the number of new orders and the average sales price of new orders increased 11.4% and 0.1%, respectively, in the first nine months of 2017 from 2016 levels. The uptick was owing to favorable market conditions in 2017, which led to a higher sales absorption rate on a year-over-year basis.
Impressive Expected Earnings & Revenue Growth: Possibly, nothing is more important than earnings growth.
On this front, NVR has put up a historical (3–5 year) EPS growth rate of 31.1% compared with the industry average of 27%. Moreover, the stock has a long-term (3–5 years) expected EPS growth rate of 17%, higher than the industry average of 12%.
The company’s 2017 earnings are expected to grow 42.5%, while the Zacks Homebuilding Industry’s earnings are likely to increase 17.4%.
Furthermore, NVR’s sales are expected to increase 11.7% in the current year compared with the industry average growth of 8.3%, thereby making it a great pick in terms of Growth investment.
Low Beta & Higher Return on Equity: NVR’s trailing 12-month return on equity (ROE) supports its growth potential. ROE in the trailing 12 months is 38.2% while the industry gained 10.8%, reflecting the company’s efficient usage of shareholders’ funds.
Again, a stock with beta less than 1 suggests that the price movement of the stock is not highly correlated with the market. Since they are less volatile than the market, they are safer bets at the moment. NVR has an impressive beta of 0.75. Adding it to your portfolio brings down your portfolio’s overall beta, thereby reducing its risk.
Solid VGM Score: NVR has a VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 make solid investment choices.
Other Stocks to Consider
You can consider a few other top-ranked stocks in the same space.
Sterling Construction Company Inc (STRL - Free Report) sports a Zack Rank #1. Its earnings are expected to grow 211.3% this year.
D.R. Horton, Inc. (DHI - Free Report) holds a Zack Rank #2. Its earnings are expected to grow 17.4% in fiscal 2018.
TRI Pointe Group, Inc. (TPH - Free Report) also carries a Zacks Rank #2. Its earnings are expected to grow 12.5% this year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Here's Why You Should Add NVR Stock to Your Portfolio Now
The housing market has of late been going strong, courtesy of steady job growth and gradual economic recovery. U.S. homebuilders' sales outlook has become more optimistic on the recent rise in homebuilder sentiment. The National Association of Home Builders/Wells Fargo builder sentiment index touched an eight-month high of 70 in November — the second highest since recession.
One such company cashing in on the favorable backdrop is NVR, Inc. (NVR - Free Report) . The company is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings.
So far this year, NVR’s shares have skyrocketed 101.9%, outperforming the industry’s 62.4% rally. Also, the company outperformed the industry in all the other time frames we considered – 4-week, 12-week and 52-week.
In fact, the Zacks Consensus Estimates for current-year and next-year earnings have moved north by 6.4% and 12.3%, respectively, in the last 60 days. This bullish analysts’ sentiment justifies the stock’s current Zacks Rank #2 (Buy) and why we are expecting the company to outperform in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Makes NVR a Solid Pick?
Solid Business Model & Stellar Performance: NVR’s solid performance was largely owing to its disciplined business model, focus on maximizing liquidity and minimizing risk. Furthermore, the company’s sole business include selling and building quality homes by typically acquiring finished building lots, without the risk of owning and developing land in a cyclical industry.
Homebuilding revenues increased 10.1% year over year in the first three quarters of 2017, primarily on a 7.8% year-over-year increase in the number of settled units. The improvement in the number of settled units was attributable to a 15.6% year-over-year hike in backlog unit balance as of Sep 30, 2017. Potential housing revenues from backlog increased 15% to $3.42 billion.
Also, the number of new orders and the average sales price of new orders increased 11.4% and 0.1%, respectively, in the first nine months of 2017 from 2016 levels. The uptick was owing to favorable market conditions in 2017, which led to a higher sales absorption rate on a year-over-year basis.
Impressive Expected Earnings & Revenue Growth: Possibly, nothing is more important than earnings growth.
On this front, NVR has put up a historical (3–5 year) EPS growth rate of 31.1% compared with the industry average of 27%. Moreover, the stock has a long-term (3–5 years) expected EPS growth rate of 17%, higher than the industry average of 12%.
The company’s 2017 earnings are expected to grow 42.5%, while the Zacks Homebuilding Industry’s earnings are likely to increase 17.4%.
Furthermore, NVR’s sales are expected to increase 11.7% in the current year compared with the industry average growth of 8.3%, thereby making it a great pick in terms of Growth investment.
Low Beta & Higher Return on Equity: NVR’s trailing 12-month return on equity (ROE) supports its growth potential. ROE in the trailing 12 months is 38.2% while the industry gained 10.8%, reflecting the company’s efficient usage of shareholders’ funds.
Again, a stock with beta less than 1 suggests that the price movement of the stock is not highly correlated with the market. Since they are less volatile than the market, they are safer bets at the moment. NVR has an impressive beta of 0.75. Adding it to your portfolio brings down your portfolio’s overall beta, thereby reducing its risk.
Solid VGM Score: NVR has a VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 make solid investment choices.
Other Stocks to Consider
You can consider a few other top-ranked stocks in the same space.
Sterling Construction Company Inc (STRL - Free Report) sports a Zack Rank #1. Its earnings are expected to grow 211.3% this year.
D.R. Horton, Inc. (DHI - Free Report) holds a Zack Rank #2. Its earnings are expected to grow 17.4% in fiscal 2018.
TRI Pointe Group, Inc. (TPH - Free Report) also carries a Zacks Rank #2. Its earnings are expected to grow 12.5% this year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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