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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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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