DHI - Embedded Expectations Analysis - 2020 12 21
D.R. Horton, Inc. (DHI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 9.1x Uniform P/E, implying bearish expectations for the firm. Although management may have concerns about home demand, unsold homes, and the strength of their position, market expectations are overly bearish, suggesting equity upside remains warranted for DHI going forwardSpecifically, management may have concerns about continued investments in land development, the sustainability of pent-up home demand, and their lot mix from Forestar. Furthermore, they may lack confidence in their ability to pace their home construction, manage homebuilding SG&A expenses, and control the level of unsold homes. Additionally, they may be overstating the strength of their position to drive shareholder value, and they may be downplaying concerns about periodic shortages of products in various areas. Moreover, they may lack confidence in their ability to maintain their liquidity position, sustain business returns, and have a sales growth rate above 80%. Finally, they may be concerned about further gross margin headwinds
Although management may have concerns about home demand, unsold homes, and the strength of their position, given the firm's shift into secular growth areas, market expectations are overly bearish, suggesting equity upside remains 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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