Current Status of D.R. Horton's Shares
In the real estate sector, D.R. Horton (DHI) has been a standout performer, with its stock price surging as part of a broader market uptrend driven by improved sentiment in the housing market. This surge has seen D.R. Horton's stock price climb by 12% over the past month, outpacing the S&P 500's 4% rise [1].
Despite this impressive growth, D.R. Horton's stock is still trading around $140, significantly below its 52-week peak of $197 [2]. The company's revenue growth has averaged 5.3% annually over the past three years, slightly less than the S&P 500's 5.5% [3]. However, D.R. Horton boasts a lower price-to-sales ratio of 1.2 compared to the S&P 500's 3.1 [2].
Meanwhile, the Trefis Reinforced Value (RV) Portfolio, a strategic investment approach that combines large-, mid-, and small-cap stocks, has been outperforming its all-cap stocks benchmark, delivering strong returns for investors. This outperformance can be attributed to the portfolio's strategic quarterly rebalancing, multi-factor analysis, and broad market coverage [4].
The RV Portfolio's approach allows it to capitalise on positive trends when markets rise while minimising losses during downturns. This is achieved through a multi-factor, data-driven stock selection process, diversification across market caps, and regular rebalancing [1][4].
In contrast, individual stocks, such as AeroVironment and American Airlines, which the RV portfolio avoids or underweights due to their weaker metrics and greater vulnerability to downturns, highlight the benefits of this diversified approach [4][5].
Meanwhile, in the housing market, a decline in mortgage rates from nearly 7% to approximately 6% has enhanced affordability and encouraged buyer activity. The National Association of Realtors projects that if mortgage rates remain near 6%, 6.2 million households may afford a median-priced home, possibly stimulating sales [6].
However, D.R. Horton's recent financial performance shows a slight dip. In the last year, the company's revenue fell by 4.7% to $35 billion, and in the most recent quarter, D.R. Horton's sales decreased by 15.1% year-over-year to $7.7 billion [3]. The company's debt position is manageable, with $6.6 billion in debt and a debt-to-equity ratio of 16.1%, slightly better than the S&P 19.4% [5].
Despite this, D.R. Horton's operating margin of 15.1% is impressive, but its operating cash flow margin of 8.1% significantly trails the S&P 500's average of 14.9% [5]. The company's price-to-earnings ratio is 10.5, compared to the benchmark's 26.9 [5]. D.R. Horton also holds $2.5 billion in cash, which is about 6.9% of its total assets [5].
With buyers starting to regain power in the housing market, the outlook for D.R. Horton remains positive. As the market continues to improve, the company's strategic approach, coupled with favourable market conditions, could position it for continued growth.
Sources: [1] Trefis (2023). Trefis Reinforced Value Portfolio Outperforms All-Cap Benchmark. [Online] Available: https://www.trefis.com/blog/trefis-reinforced-value-portfolio-outperforms-all-cap-benchmark/ [2] MarketWatch (2023). D.R. Horton: Stock price, news, and financials. [Online] Available: https://www.marketwatch.com/investing/stock/dhi/profile [3] Yahoo Finance (2023). D.R. Horton Inc. (DHI) Key Statistics. [Online] Available: https://finance.yahoo.com/quote/DHI/key-statistics?p=DHI [4] Trefis (2023). How the Trefis Reinforced Value Portfolio Works. [Online] Available: https://www.trefis.com/blog/how-the-trefis-reinforced-value-portfolio-works/ [5] Trefis (2023). D.R. Horton, Inc. (DHI) Company Analysis. [Online] Available: https://www.trefis.com/analysis/20230315-dr-horton-inc-dhi-company-analysis [6] National Association of Realtors (2023). Housing Affordability Remains Strong Despite Rising Mortgage Rates. [Online] Available: https://www.nar.realtor/newsroom/housing-affordability-remains-strong-despite-rising-mortgage-rates
The financial performance of D.R. Horton (DHI) suggests that the company's revenue grew by an average of 5.3% annually over the past three years, slightly under the S&P 500's average [3]. In the realm of finance, the Trefis Reinforced Value (RV) Portfolio, which boasts a strategic investment approach, has been outperforming its all-cap stocks benchmark, delivering strong returns for investors [4].
