Dream Finders Homes, Inc. (DFH Quick QuoteDFH - Free Report) has been on a bullish run, with shares soaring 10.6% over the past three months. This performance outpaces the Zacks Building Products - Home Builders industry’s negligible 0.01% growth, the broader Construction sector’s 12.9% rise, and even the S&P 500’s 10% rally. Investors are now asking: Is DFH stock worth buying at its current levels?

DFH has benefited from the housing market, fueled by tight inventory and strong demand, despite elevated mortgage rates. The company, which specializes in affordable and customizable homes, has carved out a niche that resonates with buyers navigating higher borrowing costs.

In its latest earnings report, DFH posted solid revenue growth and improved gross margins, reflecting effective cost management and operational efficiency. Additionally, its backlog of homes—a key indicator of future revenue—remains strong, showcasing resilience amid economic uncertainty.

DFH Stock’s 3-Month Price Performance

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Technical Strength Drives Market Confidence for DFH Stock

DFH stock is currently trading above its 50-day and 200-day simple moving averages, a clear signal of sustained bullish momentum, as shown in the chart below. The stock has held its position above the 50-day SMA since Nov. 25, showcasing robust investor confidence in the company’s financial health and growth potential.

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What’s Driving Dream Finders?

DFH operates in high-growth, low-cost states that benefit from robust migration trends, aligning with population and job growth dynamics.

Dream Finders’ Focus on Land-Light Business Model

One of Dream Finders’ key differentiators is its land-light business model, which has played a pivotal role in the company’s success and resilience in a highly cyclical homebuilding industry. Instead of tying up significant capital in land ownership, DFH focuses on securing lots through rolling takedown contracts and land banking arrangements. This allows the company to defer significant upfront costs and acquire lots on an as-needed basis just before starting construction.

The company uses rolling takedown contracts with third-party developers and land banks to minimize risk and maintain quickness. This allows flexibility in market corrections and reduces the burden of land mispricing. This strategy is reflected in its homebuilding revenues and closings, which grew 10% and 8%, respectively, compared with the first nine months of 2024 and 2023.

It also conducts cost-effective lot acquisition strategy to drive growth. As of Sept. 30, 2024, DFH's lot deposits for the finished lot option and land bank option contracts were $368 million. As of Sept. 30, 2024, the company controlled 44,825, under finished lot option and land bank option contracts.

DFH’s Market Position

This homebuilder operates in high-growth, low-cost states (e.g., Florida, Texas, Tennessee), benefiting from interstate migration. These regions often outperform during housing booms and are less sensitive to national slowdowns. Notably, 77% of total U.S. migration occurs in states where DFH operates.

Strategic Acquisitions of Dream Finders

Acquisitions allowed DFH to penetrate high-growth markets, such as Texas, Florida, and the Carolinas, enabling market dominance in regions with strong housing demand. They introduced established market positions and immediate revenue contributions, as evidenced by growth from $744 million in 2019 (post-Village Park acquisition) to $1,134 million in 2020 and $1,924 million in 2021 (post-H&H Homes and Century Homes acquisitions).

The company acquired Jet HomeLoans on July 1, 2024, marking its sixth acquisition in five years. The deal added $16 million in revenues and $7 million in pre-tax profit in the third quarter of 2024. With full ownership, the company expects to expand this business into a key profit driver for DFH.

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Dream Finders’ Valuation: A Bargain in the Industry

Despite its recent rally, DFH remains attractively valued. Its forward 12-month P/E ratio of 9.92 is below the industry average of 11.03, making it a discounted play in the homebuilding sector.

However, the company is currently trading premium to M/I Homes, Inc. (MHO Quick QuoteMHO - Free Report) , Century Communities, Inc. (CCS Quick QuoteCCS - Free Report) and Tri Pointe Homes, Inc. (TPH Quick QuoteTPH - Free Report) . MHO, CCS and TPH are trading with forward 12-month P/E multiples of 8.24, 7.35, and 9.03, respectively.

Considering the company’s trailing 12-month return on equity (ROE) of 30.2%, which significantly exceeds the industry average of 17.6%, DFH stands out as an efficient and profitable operator in a competitive market.

Image Source: Zacks Investment Research

Image Source: Zacks Investment Research

Rising Analyst Optimism for DFH

Earnings per share (EPS) estimates for DFH have been on an upward trend for 2024 and 2025, as shown in the chart below. This revision momentum reflects analysts’ growing confidence in the company’s ability to deliver strong financial results amid favorable market conditions.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Is DFH Stock a Buy Now?

For investors seeking exposure to the housing market, DFH offers a compelling combination of growth, affordability, and strategic positioning. Its valuation remains attractive relative to peers, and the company’s operational strengths position it well to navigate potential challenges.

Although risks associated with the fluctuating mortgage rate and macroeconomic challenges remain, DFH’s focus on high-demand markets and entry-level housing could make it a solid addition to a diversified portfolio. While risks remain, the stock’s valuation and market positioning suggest room for further upside. Currently, DFH sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.