NVR, Inc. (NVR), D.R. Horton, Inc. (DHI), PulteGroup, Inc. (PHM): Betting On Homebuilders?

Although NVR, Inc. (NYSE:NVR) missed consensus badly, heavily influencing the stock’s recent underperformance, the company’s order backlog was $2.18 billion at the end of the first quarter, which was up 39% from a year earlier. NVR’s key advantages that helped to build this backlog are that it refrains from engaging in large land acquisitions and avoids building speculative homes without buyers.
NVR, Inc. (NYSE:NVR)’s major Mid-Atlantic housing market also has fewer underwater and foreclosed homes. Although NVR is one of the better positioned stocks in regard to moving higher, I think I have saved the best pick for last.
Meritage Homes Corp (NYSE:MTH) is a single-family home builder that designs, builds and sells homes in Arizona, Texas, California, Nevada, Colorado, Florida and North Carolina. Meritage managed to post a first-quarter 2013 EPS of $0.32, compared to the $0.15 loss that it experienced in the same quarter last.
After the first-quarter results, consensus EPS estimates for 2013 and 2014 were upped to $2.33 and $3.49, respectively, from the most recent consensus of estimates of $2.02 and $3.15.
Meritage operates primarily in the Sunbelt states, where demand for new homes is robust. Meritage has also made a successful transition from troubled markets such as Nevada. Meritage is one of the cheapest stocks in the industry and has an amazingly high expected 5-year EPS growth rate.
Don’t be fooled
The rebounding economy and housing market has been great for the homebuilders, but is there room for these companies to move higher? It appears that Meritage is one of the cheapest companies from both a price to book and forward P/E basis, trading at 2.5 times book value and 13.9 times forward earnings. Analysts also have the highest hopes for Meritage, with the 5-year expected EPS growth coming in at an annualized 67%, well above any of the other companies.
Although D.R. Horton, Inc. (NYSE:DHI) appears cheap at 2.2 times book value, its five-year expected EPS growth rate is only 8%. Ryland showed signs of the best growth in net orders and settlements at the end of the first-quarter 2013, but the stock is already too expensive, with the good news already accounted for.
PluteGroup would be a solid investment given its exposure to the rising population through adult communities, but yet again, it’s just too expensive. Meanwhile, NVR is also expensive at 3.3 times book value, but its recent net order and settlement numbers were the lowest of the five homebuilders and doesn’t justify that premium valuation.
I think some of the other homebuilders might already have the upside baked in, but Meritage could still be undervalued and has room to move higher, so that’s my homebuilder pick.
The article Betting on the Home Builders: Is It too Late? originally appeared on Fool.com and is written by Marshall Hargrave.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!