It is no secret that the US housing rebound has been a topic of conversation. The US housing market has taken a promising turn. According to the National Home Builders Association, 917,000 single-family homes were started in February 2013, up 28% year-over-year. Builder permits also increased to 946,000, up 34% year-over-year. With the housing market booming, it is important to do your due diligence in evaluating companies.
When evaluating the performance of homebuilders, there are a few important metrics to focus on, in addition to our traditional fundamentals. We are looking for companies who have increased the number of homes delivered, the number of new orders or contracts, their average selling price per home, and the number of homes currently in backlog. Let us know analyze a few top homebuilders to see where they measure in terms of our housing metrics.
Lennar Corporation (NYSE:LEN) has benefited greatly from the recent upswing in the housing market. In the first quarter of 2013 Lennar Corporation (NYSE:LEN) delivered an earnings beat of $.26 per share on an estimate of $.15. The company’s home deliveries and new orders were up, year-over-year, 28% and 34% respectively. Lennar Corporation (NYSE:LEN) also increased its average selling price from $246,000 to $269,000, or 9%. The company also has a hefty backlog of 4,922 units or $1.5 billion, up 82% and 105%. Lennar Corporation (NYSE:LEN) currently trades at just 12.83 trailing-twelve months earnings and analysts are predicting growth of 32% and 28% in 2013 and 2014 respectively. When a company has a PE ratio less then its expected growth rate, which Lennar Corporation (NYSE:LEN) has in this case, the stock price has yet to catch up with the company’s growth potential. This is also shown in the PEG ratio of which Lennar sports a hefty 12.64.
The next company we will look at is Toll Brothers Inc (NYSE:TOL). The company, commonly considered in the upper echelon of homebuilders, recently reported very promising first quarter results. Home deliveries and new contracts were up 32% and 52% year-over-year. However, Toll Brothers Inc (NYSE:TOL) average selling price decreased from 569,000 to 582,000, or -2%. The company has a promising backlog of 2,796 units or $1.86 billion, which is an increase of 66 and 57%. The average price per unit in backlog is $665,000, which is up $39,000 or 6% year-over-year. Toll Brothers Inc (NYSE:TOL) also has great growth prospects with analysts estimating revenue growth at 32% and 39% for 2013 and 2014.