Report
Valens Research

DHI - Embedded Expectations Analysis - 2021 03 25

D.R. Horton, Inc. (DHI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 9.0x Uniform P/E, implying bearish expectations for the firm. Although management may have concerns about their home closures, changes to the macro environment, and inventory levels, market expectations are overly bearish, suggesting equity upside remains warranted going forward

Specifically, management may lack confidence in their ability to effectively operate in changing economic conditions, maintain EPS growth, and sustain their home closure pace. In addition, management may be overstating the strength of their current business position as well as their focus on relationships and execution in the field. Furthermore, they may lack confidence in their ability to expand their production capacity and continue exploring the single-family rental business, and they may be downplaying concerns about the sustainability of the low interest rate environment. Finally, they may have concerns about their homebuilding lot mix, declines in completed inventory levels, and potential declines in gross margins

Although management may have concerns about home closures, the macro environment, and inventory levels, given the firm's shift into secular growth areas, market expectations are overly bearish, suggesting equity upside remains warranted
Underlying
D.R. Horton Inc.

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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Valens Research
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