DHI - Embedded Expectations Analysis - 2020 02 10
ï€ D.R. Horton, Inc. (DHI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 12.7x Uniform P/E, implying bearish expectations for the firm. While management's concerns about growth, margins, and their pipeline suggest the potential for near term headwinds, should DHI just maintain profitability near current levels, longer-term upside remains warrantedï€ Specifically, management may lack confidence in their ability to sustain sales and EPS growth, maintain gross profit margins, and expand their lot option percentage as Forestar grows. Moreover, they may be exaggerating the strength of their financing availability and their ability to get equivalent returns from spec housing, despite lower gross margins. Finally, management may be concerned about the lead time for their DHI Communities pipeline, and they may lack confidence in their ability to increase their first-time homebuyer mix
ï€ However, given potential demographic and macro tailwinds, longer-term upside remains warranted, and equity upside is likely
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.