D.R. Horton Inc (DHI, Financial) recently showcased a daily gain of 6.47%, complementing a three-month gain of 8.68%. With an Earnings Per Share (EPS) of 14.69, investors might wonder if the stock is currently overvalued. This analysis delves into D.R. Horton's valuation, encouraging readers to explore the intricacies of its market positioning and financial metrics.
Company Introduction
D.R. Horton, a premier homebuilder in the United States, operates across 118 markets in 33 states. Primarily focusing on single-family detached homes, which constitute over 90% of its sales revenue, D.R. Horton caters to a diverse clientele including entry-level, move-up, luxury buyers, and active adults. The company also provides mortgage financing and title agency services through its financial services segment. With a current stock price of $157.58 and a GF Value of $127.21, D.R. Horton appears modestly overvalued. This valuation provides a perfect segue into a deeper exploration of the company's intrinsic value and market performance.
Understanding the GF Value
The GF Value is a proprietary measure reflecting the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For D.R. Horton, the GF Value suggests the stock is trading above its fair value, indicating potential overvaluation. This assessment is crucial as it implies that the stock's future return might lag behind its business growth.
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Financial Strength and Stability
Investing in companies with robust financial strength reduces the risk of permanent capital loss. D.R. Horton's cash-to-debt ratio of 0.51, which is commendable within the industry, reflects its solid financial grounding. The company's overall financial strength, rated 7 out of 10 by GuruFocus, underscores its capability to meet financial obligations while pursuing growth opportunities.
Profitability and Growth Prospects
D.R. Horton has consistently demonstrated profitability, which is a promising indicator for potential investors. With an operating margin of 16.98%, the company outperforms 80% of its peers in the industry. Furthermore, its impressive 3-year average annual revenue growth rate of 23.5% significantly surpasses industry averages, highlighting its efficiency in generating profits and expanding its market presence.
Another pivotal financial metric is the comparison between the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). D.R. Horton's ROIC of 17.82 exceeds its WACC of 12.24, indicating effective management and value creation for shareholders.
Conclusion
In conclusion, while D.R. Horton Inc (DHI, Financial) appears modestly overvalued based on its current market price and GF Value, the company's strong financial health and robust profitability suggest it remains an attractive option for long-term investors. For a deeper dive into D.R. Horton's financials, consider exploring its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
