Value Surprises among Homebuilders Shares? (NVR, TOL, PHM, HOV, DHI, BZH, KBH, LEN, HD, LOW)

Share prices for homebuilders' stocks began rising at the beginning of the year and all but two of the homebuilders we looked at in our value search have doubled share prices in the past 12 months. What's more, all are trading within a percent of or above their consensus target price. But based on forward P/E ratios, a couple of the builders may offer a realistic value play.

The stocks we looked at are NVR Corp. (NYSE: NVR), Toll Brothers Inc. (NYSE: TOL), PulteGroup Inc. (NYSE: PHM), Hovnanian Enterprises Inc. (NYSE: HOV), DR Horton Inc. (NYSE: DHI), Beazer Homes USA Inc. (NYSE: BZH), KB Home (NYSE: KBH), and Lennar Corp. (NYSE: LEN). We also took a look at home improvement retailers The Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW).

NVR Corp. (NYSE: NVR) traded at $851.50 and has a market value of around $4.4 billion. The consensus target price from Thomson Reuters is $853.20 and the 52-week range is $554.71-$879.99. NVR does not pay a dividend. The implied upside to the consensus target is less than 1%, and we note that the target is below the 52-week high. Trailing P/E is 31.29 and forward P/E is 17.74. Short interest in the stock totals about 216,000 shares, or 4.5% of the float.

Toll Brothers Inc. (NYSE: TOL) traded at $33.39 and has a market value of around $5.6 billion. The consensus target price from Thomson Reuters is $32.91 and the 52-week range is $13.16-$33.68. Toll Brothers does not pay a dividend. Today's share price exceeds the consensus target price. Trailing P/E is 62 and forward P/E is 31.89. Short interest in the stock totals about 10.6 million shares, or 8.9% of the float.

PulteGroup Inc. (NYSE: PHM) traded at $14.53 after setting a new 52-week high of $14.60 earlier today. The company has a market value of around $5.6 billion. The consensus target price from Thomson Reuters is $13.03 and the prior 52-week range is $3.29-$14.08. PulteGroup does not pay a dividend. Today's share price exceeds the consensus target price. Trailing P/E is negative and forward P/E is 16.15. Short interest in the stock totals about 31.8 million shares, or 9.4% of the float.

Hovnanian Enterprises Inc. (NYSE: HOV) traded at $3.13 and has a market value of around $393 million. The consensus target price from Thomson Reuters is $1.93 and the 52-week range is $0.89-$3.31. Hovnanian does not pay a dividend. Today's share price exceeds the consensus target price. Trailing and forward P/E are both negative. Short interest in the stock totals about 28.2 million shares, or 40.8% of the float.

DR Horton Inc. (NYSE: DHI) traded at $19.76 after setting a new 52-week high of $19.89 earlier today. The company has a market value of around $6.3 billion. The consensus target price from Thomson Reuters is $19.66 and the prior 52-week range is $8.03-$19.35. DR Horton pays a dividend yield of 0.8%. Today's share price exceeds the consensus target price. Trailing P/E is 7.46 and forward P/E is 21.51. Short interest in the stock totals about 34.8 million shares, or 15.3% of the float.

Beazer Homes USA Inc. (NYSE: BZH) traded at $3.06 and has a market value of around $305 million. The consensus target price from Thomson Reuters is $3.10 and the 52-week range is $1.35-$3.98. Beazer does not pay a dividend. The implied upside to the consensus target is about 1%, and we note that the target is below the 52-week high. Trailing and forward P/E are both negative. Short interest in the stock totals about 22.5 million shares, or 30.1% of the float.

KB Home (NYSE: KBH) traded at $11.64 and has a market value of around $907 million. The consensus target price from Thomson Reuters is $10.55 and the 52-week range is $5.02-$13.12. KB Home pays a dividend yield of 0.9%. Today's share price exceeds the consensus target price. Trailing P/E is negative and forward P/E is 233.00. Short interest in the stock totals about 31.1 million shares, or 57.4% of the float.

Lennar Corp. (NYSE: LEN) traded at $33.94 after posting a new 52-week high of $34.20 earlier today. The company has a market value of around $6.4 billion. The consensus target price from Thomson Reuters is $31.23 and the prior 52-week range was $12.14-$33.14. Lennar pays a dividend yield of 0.5%. Today's share price exceeds the consensus target price. Trailing P/E is 13.47 and forward P/E is 24.30. Short interest in the stock totals about 33.7 million shares, or 22% of the float.

The Home Depot Inc. (NYSE: HD) traded at $57.38 after posting a new 52-week high of $57.44 earlier today. The company has a market value of around $86.4 billion. The consensus target price from Thomson Reuters is $58.13 and the prior 52-week range was $31.03-$57.18. Home Depot pays a dividend yield of 2%. The implied upside to the consensus target is about 1%, and we note that the target is above the 52-week high. Trailing P/E is 20.58 and forward P/E is 16.99. Short interest in the stock totals about 20 million shares, or 1.6% of the float.

Lowe's Companies Inc. (NYSE: LOW) traded at $28.66 and has a market value of around $33 billion. The consensus target price from Thomson Reuters is $29.59 and the 52-week range is $18.28-$32.29. Lowe's pays a dividend yield of 2.3%. The implied upside to the consensus target is about 3%, and we note that the target is below the 52-week high. Trailing P/E is 19.19 and forward P/E is 14.04. Short interest in the stock totals about 16.2 million shares, or 1.4% of the float.

With little or no implied gains available, P/E ratios indicate that both NVR and PulteGroup may offer the best choices for a value/growth play among the homebuilders stocks. KB Home's forward P/E is astronomical, and the negative ratios at Hovnanian and Beazer are not encouraging signs. The others, with forward P/E ratios of 20 or more, might also be fully valued in the near term.

As for the home improvement stores, either might be a reasonable alternative, especially given their dividend yields and relatively modest forward P/E ratios (at least compared to some of the homebuilders).

Paul Ausick


Filed under: 24/7 Wall St. Wire, Housing, Value Investing Tagged: BZH, DHI, featured, HD, HOV, KBH, LEN, LOW, NVR, PHM, TOL

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