Why M/I Homes Shares Tumbled
Jan 31st 2013 3:04PM
Updated Jan 31st 2013 3:51PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of homebuilder M/I Homes fell as much as 10% after reporting its fourth-quarter earnings results.
So what: For the quarter, M/I Homes reported a 33% increase in new home contracts, a 46% increase in its backlog, and a profit of $0.23. It also marked the first time M/I Homes has turned a full-year profit since 2006. Despite the incredibly strong results, M/I Homes fourth-quarter profit and total quarterly revenue was $0.04 and about $4 million below Wall Street's estimates.
Now what: Many homebuilders have already had incredible runs off their lows despite results that still place them at very aggressive forward P/E ratios. M/I Homes is one such company, trading at 22 times forward earnings even after today's drop. That may not sound like much, but considering that it took the company six years to turn an annual profit, I'm not ready to let it off the leash just yet. Until I see continued improvement in the housing landscape, and M/I's valuation becomes more attractive, I'd suggest steering clear.
Craving more input? Start by adding M/I Homes to your free and personalized Watchlist so you can keep up on the latest news with the company.
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The article Why M/I Homes Shares Tumbled originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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