DHI - Embedded Expectations Analysis - 2018 02 27
ï€ DR Horton Inc. (DHI:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 13.6x Uniform P/E. At these levels, the market has fairly bearish expectations for the firm, which is unwarranted given management's confidence in their backlog and their balance sheet, and as such, further upside is likelyï€ Specifically, management generated an excitement marker when saying that their backlog conversion rate for the first quarter was 88%. Furthermore, they are confident in the strength of their balance sheet, and in the 9% increase in homes in backlog. This positive sentiment, coupled with bullish analyst sentiment, positive industry momentum, and DHI's fairly stable profitability since the recession, suggests it is likely the firm can outperform muted market expectations, and in that scenario, upside would be warranted
D.R. Horton is a homebuilding company. The company's business operations consist of homebuilding, a majority-owned residential lot development company, financial services and other activities. The company's financial services operations provide mortgage financing and title agency services to homebuyers in its homebuilding markets. The company's subsidiary, DHI Mortgage, provides mortgage financing services primarily to its homebuyers and generally sells the mortgages it originates and the related servicing rights to third-party purchasers. The company's subsidiary title companies serve as title insurance agents by providing title insurance policies, examination and closing services, primarily to its homebuyers.
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