It hasn't been a great afternoon session for D.R. Horton investors, who have watched their shares sink by -2.3% to a price of $114.06. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
D.R. Horton Has Attractive Multiples and Trades Below Its Graham Number:
D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.33 and an average price to book (P/B) ratio of 3.12. In contrast, D.R. Horton has a trailing 12 month P/E ratio of 8.1 and a P/B ratio of 1.78.
When we divide D.R. Horton's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.57. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Company Has a Positive Net Current Asset Value:
| 2017-10-01 | 2018-10-01 | 2019-10-01 | 2020-10-01 | 2021-10-01 | 2022-10-01 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $14,091 | $16,068 | $17,593 | $20,311 | $27,774 | $33,480 |
| Gross Margins | 22.0% | 23.0% | 22.0% | 24.0% | 28.0% | 31.0% |
| Operating Margins | 11% | 12% | 12% | 14% | 19% | 23% |
| Net Margins | 7.0% | 9.0% | 9.0% | 12.0% | 15.0% | 17.0% |
| Net Income (MM) | $1,038 | $1,460 | $1,618 | $2,374 | $4,176 | $5,858 |
| Earnings Per Share | $0.82 | $1.14 | $1.29 | $1.93 | $3.45 | $16.01 |
| EPS Growth | n/a | 39.02% | 13.16% | 49.61% | 78.76% | 364.06% |
| Diluted Shares (MM) | 1,262 | 1,277 | 1,257 | 1,233 | 1,212 | 366 |
| Free Cash Flow (MM) | $592 | $613 | $1,019 | $2,036 | $1,262 | $1,069 |
| Capital Expenditures (MM) | -$157 | -$68 | -$127 | -$157 | -$230 | -$148 |
| Net Current Assets (MM) | $5,817 | $6,945 | $7,484 | $10,943 | $10,917 | $1,180 |
| Long Term Debt (MM) | $2,872 | $3,204 | $3,399 | $4,283 | $5,412 | $6,067 |
D.R. Horton has exceptional EPS growth, an excellent current ratio, and healthy debt levels. However, the firm has slimmer gross margins than its peers. Finally, we note that D.R. Horton has weak revenue growth and a flat capital expenditure trend, average net margins with a positive growth rate, and irregular cash flows.
