5 Most Profitable Small-Cap Stocks Now

4. M/I Homes, Inc. (NYSE:MHO)

Number of Hedge Fund Holders: 26

Net Income (TTM) as of December 31, 2022: $490.6 million

M/I Homes, Inc. (NYSE:MHO) is an American homebuilding company. The company has four business segments: Northern Homebuilding, Southern Homebuilding, and Financial Services. As of February 17, M/I Homes, Inc. (NYSE:MHO) has returned 21.64% to investors over the past 6 months.

On February 1, M/I Homes, Inc. (NYSE:MHO) posted earnings for the fourth quarter of fiscal 2022. The company reported earnings per share of $5.15 and outperformed EPS expectations by $0.99. For fiscal 2022, M/I Homes, Inc. (NYSE:MHO) generated a net income of $490.6 million. The stock ranks fourth among the most profitable small-cap stocks.

M/I Homes, Inc. (NYSE:MHO) was spotted on 26 investors’ portfolios at the end of Q3 2022. The total stakes of these hedge funds amounted to $109.7 million. As of December 31, Balyasny Asset Management is the largest shareholder in the company with a stake worth $23.8 million.

Here is what Miller Value Partners had to say about M/I Homes, Inc. (NYSE:MHO) in its fourth-quarter 2022 investor letter:

“During the quarter, we initiated a new investment in M/I Homes, Inc. (NYSE:MHO), what we deem as a significantly misplaced homebuilder. M/I Homes’ share price is 40% below its recent highs, at valuation levels near/below 2008-09 and 2020 industry troughs. Homebuilders in general have been under pressure due to marketplace concerns on the potential impact from higher mortgage rates and lower housing affordability. However, we believe the positive demographics and lack of housing supply over the page 10 years provides a very favorable long-term supply/demand picture for the industry that should shorten the current downturn. M/I Homes is nicely diversified covering multiple home-type categories, with properties in valuable local communities in the Midwest and Southeast (#2 in the Jon Burns Real Estate Consulting Submarket Desirability Index). The company appears well positioned with a strong land portfolio and a backlog that remains higher than 2019 levels. M/I Homes also has a strong balance sheet, with net debt to capital near 25% and no debt maturities through 2028. With their strong backlog, management still sees potential for Return on Equity to remain above 20% which, if achieved, would lead to strong tangible book value growth over the next couple of years. With market expectations and valuation near historical troughs (EV/Revenue <.5x, EV/EBIT near 3x and deep discount to tangible book value), the  share price is already discounting a deep and extended industry trough. M/I Homes’ attractive asset base, strong balance sheet and deep valuation discount to peers should provide an attractive long-term reward/risk investment opportunity.”