Stock Analysis & Ideas

Here’s Why Investors Could Find D.R. Horton Stock Attractive

Story Highlights

Shares of D.R. Horton have grown 105.42% in the last five years, Further, the company’s diversified business portfolio and a sound capital allocation policy help it cherish a Strong Buy rating on TipRanks. Now, let’s explore more about this $25.5-billion realtor.  

Founded in 1978, D.R. Horton, Inc. (NYSE: DHI) has grown to become one of the largest home builders, by volume, in the United States. Its growth is evident from the approximately 375.2% increase in the number of home closings from 2011 to 2021. Revenues of the company have grown by 22.5% CAGR in the last 10 fiscal years.

On TipRanks, the Street looks impressed with the company’s prospects and has a Strong Buy consensus rating based on 10 Buys and three Holds. DHI’s average price forecast is pegged at $89.12, suggesting 23.7% upside potential from current levels. In the last five years, shares of this $25.5-billion company have increased 105.42%.

Factors That Make D.R. Horton Stock Attractive

Headquartered in Arlington, TX, D.R. Horton benefits from its presence in nearly 104 markets (including Austin, Houston, Phoenix, and Atlanta) and 32 states in the United States. Its home brands catering to the needs of luxury, entry-level, adult, and move-up buyers enhance its scale of operations.

Attractive pricing, ranging from affordable to higher rates, helps it tap all types of home buyers. In the trailing 12 months (TTM) ended March 31, 2022, 62% of the company’s home closings were priced below $350 thousand. Its high-end home closing (prices >$500 thousand) comprised 9% of the total closings.

Also, an experienced and dedicated team, increasing homebuilding return on inventory (nearly 40.3% in TTM ended March 2022 versus 37.9% in 2021), and a sound capital allocation strategy add to its appeal.

In the first half of Fiscal 2022 (ended March 31, 2022), the company used $72.5 million for property and equipment, $159.2 million for paying dividends, and $569.8 million for repurchasing shares.

Also, the company acquired Vidler Water Resources in May 2022. The latter has water assets and water-related rights that can solve D.R. Horton’s water demand for its development projects.

For Fiscal 2022, D.R. Horton forecasts revenues to be within the $35.3-$36.1 billion range, higher than the $27.8 billion reported in the previous year. Home closed is predicted to be within the 88,000 to 90,000 range. Also, revenues are expected to be $8.6-$9 billion in the third quarter. A healthy inventory of 59,800 homes at the end of the first half of 2022 will enable the company to leverage solid demand.

In June 2022, D.R. Horton’s Chairman of the Board, Donald R. Horton, said, “Housing market conditions remain strong despite the rise in mortgage rates, as we continue to experience homebuyer demand that exceeds our pace of supply.”

Bloggers & Analysts Are Positive

Six days ago, Anthony Pettinari of Citigroup reiterated a Buy rating on DHI with a price target of $73 (0.69% upside potential).

Another analyst, Mathew Bouley of Barclays, too, has a Buy rating on DHI. His price target of $96 suggests 32.41% upside potential from the current level.

Per TipRanks, financial bloggers are 88% Bullish on DHI, compared with the sector average of 66%.

Key Takeaways

Even though the interest rates are rising, D.R. Horton could attract investors seeking exposure to the U.S. housing market. The company’s solid fundaments, healthy prospects, and sound operating conditions in the industry underpin its strengths.

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