D.R. Horton Inc Valuation – February 2019 $DHI

Company Profile (excerpt from Reuters): D.R. Horton, Inc., incorporated on July 1, 1991, is a homebuilding company. The Company has operations in 84 markets in 29 states across the United States. The Company’s segments include its 44 homebuilding divisions, its financial services operations and its other business activities. It operates under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Regent Homes, Crown Communities and Pacific Ridge Homes.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $14,964,927,009 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.26 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 169.76% Pass
6. Moderate PEmg Ratio PEmg < 20 12.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.64 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 9.26 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.30 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.22
MG Growth Estimate 12.97%
MG Value $110.91
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $46.70
MG Value based on 0% Growth $27.38
Market Implied Growth Rate 1.97%
Current Price $40.08
% of Intrinsic Value 36.14%

D. R. Horton Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.73 in 2015 to an estimated $3.22 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into D. R. Horton Inc revealed the company was trading below its Graham Number of $44.1. The company pays a dividend of $0.5 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 12.44, which was below the industry average of 20.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $18.75.

D. R. Horton Inc fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $18.75
Graham Number $44.10
PEmg 12.44
Current Ratio 9.26
PB Ratio 1.64
Current Dividend $0.50
Dividend Yield 1.25%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $12,363,900,000
Total Current Liabilities $1,335,500,000
Long-Term Debt $3,342,300,000
Total Assets $14,535,800,000
Intangible Assets $158,400,000
Total Liabilities $5,237,600,000
Shares Outstanding (Diluted Average) 380,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.62
Sep2018 $3.81
Sep2017 $2.74
Sep2016 $2.36
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $2.32
Sep2003 $1.37
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.22
Sep2018 $2.84
Sep2017 $2.24
Sep2016 $1.99
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.83
Sep2007 $1.61
Sep2006 $3.27
Sep2005 $2.70
Sep2004 $1.63
Sep2003 $1.21

Recommended Reading:

Other ModernGraham posts about the company

D.R. Horton Inc Valuation – May 2018 $DHI
Stocks Trading Closest to Net Current Asset Value – April 2017
15 Best Stocks for Value Investors This Week – 1/14/17
D.R. Horton Inc Valuation – January 2017 $DHI
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – February 2019 $MLM
Fluor Corp Valuation – February 2019 $FLR
Lennar Corp Valuation – February 2019 $LEN
Vulcan Materials Co Valuation – February 2019 $VMC
PulteGroup Inc Valuation – January 2019 $PHM
Sherwin-Williams Co Valuation – January 2019 $SHW
Johnson Controls International PC Valuation – January 2019 $JCI
Cummins Inc Valuation – January 2019 $CMI
Flowserve Corp Valuation – January 2019 $FLS
Home Depot Inc Valuation – November 2018 $HD

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc Valuation – May 2018 $DHI

Company Profile (excerpt from Reuters): D.R. Horton, Inc., incorporated on July 1, 1991, is a homebuilding company. The Company constructed and sold homes in 27 states and 79 markets, as of September 30, 2015. The Company’s segments include its 39 homebuilding divisions, its financial services operations and its other business activities. It operates under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Regent Homes, Crown Communities and Pacific Ridge Homes.

DHI Chart

DHI data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $16,874,222,427 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.95 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1282.19% Fail
6. Moderate PEmg Ratio PEmg < 20 16.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.09 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.95 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.34 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.75
MG Growth Estimate 12.67%
MG Value $93.07
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $39.88
MG Value based on 0% Growth $23.38
Market Implied Growth Rate 3.88%
Current Price $44.71
% of Intrinsic Value 48.04%

D. R. Horton Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.49 in 2014 to an estimated $2.75 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into D. R. Horton Inc revealed the company was trading above its Graham Number of $40.51. The company pays a dividend of $0.4 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 16.26, which was below the industry average of 26.36, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $16.13.

D. R. Horton Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $16.13
Graham Number $40.51
PEmg 16.26
Current Ratio 6.95
PB Ratio 2.09
Current Dividend $0.40
Dividend Yield 0.89%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $11,210,600,000
Total Current Liabilities $1,612,300,000
Long-Term Debt $3,233,900,000
Total Assets $13,218,100,000
Intangible Assets $109,200,000
Total Liabilities $5,019,200,000
Shares Outstanding (Diluted Average) 383,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.53
Sep2017 $2.74
Sep2016 $2.36
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $3.09
Sep2003 $2.05
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.69
Sep1998 $0.47

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.75
Sep2017 $2.24
Sep2016 $1.99
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.78
Sep2007 $1.76
Sep2006 $3.52
Sep2005 $3.04
Sep2004 $2.07
Sep2003 $1.45
Sep2002 $1.07

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Closest to Net Current Asset Value – April 2017
15 Best Stocks for Value Investors This Week – 1/14/17
D.R. Horton Inc Valuation – January 2017 $DHI
10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016
15 Best Undervalued Stocks of the Week – 8/20/16

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – May 2018 $MLM
Fluor Corporation Valuation – April 2018 $FLR
Lennar Corp Valuation – April 2018 $LEN
Vulcan Materials Co Valuation – April 2018 $VMC
PulteGroup Inc Valuation – March 2018 $PHM
Sherwin-Williams Co Valuation – March 2018 $SHW
Cummins Inc Valuation – March 2018 $CMI
Johnson Controls International PLC Valuation – March 2018 $JCI
Flowserve Corp Valuation – February 2018 $FLS
Corning Inc Valuation – February 2018 $GLW

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc Valuation – January 2017 $DHI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how D.R Horton Inc (DHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): D.R. Horton, Inc. is a homebuilding company. The Company constructed and sold homes in 27 states and 79 markets, as of September 30, 2015. The Company’s segments include its 39 homebuilding divisions, its financial services operations and its other business activities. In the homebuilding segment, the Company builds and sells single-family detached homes and attached homes, such as town homes, duplexes, triplexes and condominiums. The Company’s 39 homebuilding divisions are aggregated into six segments: East Region, South Central Region, Midwest Region, West Region, Southwest Region and Southeast Region. In the financial services segment, the Company sells mortgages and collects fees for title insurance agency and closing services. The Company has subsidiaries that conduct insurance-related operations; construct and own income-producing rental properties; own non-residential real estate, including ranch land and improvements, and own and operate oil and gas-related assets.

DHI Chart

DHI data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,607,755,527 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.64 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -174.73% Fail
6. Moderate PEmg Ratio PEmg < 20 12.97 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.56 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.40 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.18
MG Growth Estimate 11.87%
MG Value $70.21
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $31.57
MG Value based on 0% Growth $18.51
Market Implied Growth Rate 2.23%
Current Price $28.23
% of Intrinsic Value 40.21%

D.R. Horton, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.22 in 2013 to an estimated $2.18 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.23% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into D.R. Horton, Inc. revealed the company was trading below its Graham Number of $32.39. The company pays a dividend of $0.32 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 12.97, which was below the industry average of 28.49, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $13.03.

D.R. Horton, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $13.03
Graham Number $32.39
PEmg 12.97
Current Ratio 6.64
PB Ratio 1.56
Current Dividend $0.32
Dividend Yield 1.13%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $9,653,600,000
Total Current Liabilities $1,454,100,000
Long-Term Debt $3,271,300,000
Total Assets $11,558,900,000
Intangible Assets $80,000,000
Total Liabilities $4,766,400,000
Shares Outstanding (Diluted Average) 375,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.56
Sep2016 $2.36
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $3.09
Sep2003 $2.05
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.69
Sep1998 $0.47
Sep1997 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.18
Sep2016 $1.99
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.78
Sep2007 $1.76
Sep2006 $3.52
Sep2005 $3.04
Sep2004 $2.07
Sep2003 $1.45
Sep2002 $1.07
Sep2001 $0.82

Recommended Reading:

Other ModernGraham posts about the company

18 Best Stocks For Value Investors This Week – 1/30/16
D.R. Horton Inc Valuation – January 2016 Update $DHI
8 Best Stocks For Value Investors This Week – 10/13/15
D.R. Horton Inc. Analysis – October 2015 Update $DHI
The Best Companies of the Construction Industry – October 2015

Other ModernGraham posts about related companies

Quanta Services Inc Valuation – August 2016 $PWR
Jacobs Engineering Group Inc Valuation – August 2016 $JEC
PPG Industries Inc Valuation – August 2016 $PPG
D.R. Horton Inc Valuation – August 2016 $DHI
Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc Valuation – August 2016 $DHI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how D.R. Horton Inc (DHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): D.R. Horton, Inc. is a homebuilding company. The Company is engaged in the acquisition and development of land and the construction and sale of residential homes, through its operating divisions in around 27 states and over 79 metropolitan markets of the United States, under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Breland Homes, Regent Homes, Crown Communities and Pacific Ridge Homes. The Company operates through two segments: homebuilding and financial services operation. The Company designs, builds and sells single-family detached homes on lots it develops and on fully developed lots purchased ready for home construction. To a lesser extent, the Company builds and sells attached homes, such as town homes, duplexes, triplexes and condominiums. The Company sells land and lots to other developers and homebuilders where it has excess land and lot positions or for other strategic reasons.

DHI Chart

DHI data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,902,391,084 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.20 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -147.57% Fail
6. Moderate PEmg Ratio PEmg < 20 16.22 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.86 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.20 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.10 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DHI value chart August 2016

EPSmg $1.98
MG Growth Estimate 15.00%
MG Value $76.36
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $28.76
MG Value based on 0% Growth $16.86
Market Implied Growth Rate 3.86%
Current Price $32.16
% of Intrinsic Value 42.12%

D.R. Horton, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.35 in 2012 to an estimated $1.98 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into D.R. Horton, Inc. revealed the company was trading above its Graham Number of $30.35. The company pays a dividend of $0.3 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 16.22, which was below the industry average of 28.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $12.24.

D.R. Horton, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

DHI charts August 2016

Net Current Asset Value (NCAV) $12.24
Graham Number $30.35
PEmg 16.22
Current Ratio 2.20
PB Ratio 1.86
Current Dividend $0.30
Dividend Yield 0.94%
Number of Consecutive Years of Dividend Growth 3

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $9,422,800,000
Total Current Liabilities $4,275,100,000
Long-Term Debt $504,200,000
Total Assets $11,333,200,000
Intangible Assets $87,200,000
Total Liabilities $4,821,000,000
Shares Outstanding (Diluted Average) 375,900,000

Earnings Per Share History

Next Fiscal Year Estimate $2.34
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $3.09
Sep2003 $2.05
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.69
Sep1998 $0.47
Sep1997 $0.32
Sep1996 $0.41

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.98
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.78
Sep2007 $1.76
Sep2006 $3.52
Sep2005 $3.04
Sep2004 $2.07
Sep2003 $1.45
Sep2002 $1.07
Sep2001 $0.82
Sep2000 $0.63

Recommended Reading:

Other ModernGraham posts about the company

18 Best Stocks For Value Investors This Week – 1/30/16
D.R. Horton Inc Valuation – January 2016 Update $DHI
8 Best Stocks For Value Investors This Week – 10/13/15
D.R. Horton Inc. Analysis – October 2015 Update $DHI
8 Best Stocks For Value Investors This Week – 10/13/15

Other ModernGraham posts about related companies

Martin Marietta Materials Inc Valuation – August 2016 $MLM
Fluor Corporation Valuation – August 2016 $FLR
Vulcan Materials Co Valuation – July 2016 $VMC
PulteGroup Inc Valuation – July 2016 $PHM
Sherwin-Williams Co Valuation – July 2016 $SHW
Cummins Inc Valuation – July 2016 $CMI
Corning Inc Valuation – May 2016 $GLW
Flowserve Corporation Valuation – May 2016 $FLS
Lennar Corporation Valuation – May 2016 $LEN
Quanta Services Inc Valuation – February 2016 $PWR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc Valuation – January 2016 Update $DHI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how D.R. Horton Inc (DHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): D.R. Horton, Inc. is a homebuilding company. The Company is engaged in the acquisition and development of land and the construction and sale of residential homes, through its operating divisions in around 27 states and over 79 metropolitan markets of the United States, under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Breland Homes, Regent Homes, Crown Communities and Pacific Ridge Homes. The Company operates through two segments: homebuilding and financial services operation. The Company designs, builds and sells single-family detached homes on lots it develops and on fully developed lots purchased ready for home construction. To a lesser extent, the Company builds and sells attached homes, such as town homes, duplexes, triplexes and condominiums. The Company sells land and lots to other developers and homebuilders where it has excess land and lot positions or for other strategic reasons.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,104,069,999 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.76 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -146.60% Fail
6. Moderate PEmg Ratio PEmg < 20 13.79 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.63 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.47 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DHI value chart January 2016

EPSmg $1.94
MG Growth Estimate 15.00%
MG Value $74.82
Opinion Undervalued
MG Value based on 3% Growth $28.18
MG Value based on 0% Growth $16.52
Market Implied Growth Rate 2.65%
Current Price $26.80
% of Intrinsic Value 35.82%

D.R. Horton Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.35 in 2012 to an estimated $1.94 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% annual earnings loss over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on D.R. Horton Inc (DHI)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

DHI charts January 2016

Net Current Asset Value (NCAV) $11.52
Graham Number $28.66
PEmg 13.79
Current Ratio 6.76
PB Ratio 1.63
Dividend Yield 0.94%
Number of Consecutive Years of Dividend Growth 3

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $9,366,600,000
Total Current Liabilities $1,384,700,000
Long-Term Debt $3,734,300,000
Total Assets $11,179,500,000
Intangible Assets $87,200,000
Total Liabilities $5,120,100,000
Shares Outstanding (Diluted Average) 368,650,000

Earnings Per Share History

Next Fiscal Year Estimate $2.22
Sep2015 $2.03
Sep2014 $1.50
Sep2013 $1.33
Sep2012 $2.77
Sep2011 $0.23
Sep2010 $0.77
Sep2009 -$1.73
Sep2008 -$8.34
Sep2007 -$2.27
Sep2006 $3.90
Sep2005 $4.62
Sep2004 $3.09
Sep2003 $2.05
Sep2002 $1.44
Sep2001 $1.11
Sep2000 $0.84
Sep1999 $0.69
Sep1998 $0.47
Sep1997 $0.32
Sep1996 $0.24

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.94
Sep2015 $1.73
Sep2014 $1.49
Sep2013 $1.22
Sep2012 $0.35
Sep2011 -$1.33
Sep2010 -$1.92
Sep2009 -$2.43
Sep2008 -$1.78
Sep2007 $1.76
Sep2006 $3.52
Sep2005 $3.04
Sep2004 $2.07
Sep2003 $1.45
Sep2002 $1.07
Sep2001 $0.82
Sep2000 $0.62

Recommended Reading:

Other ModernGraham posts about the company

8 Best Stocks For Value Investors This Week – 10/13/15
The Best Companies of the Construction Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
D.R. Horton Inc. Analysis – July 2015 Update $DHI
The Best Companies of the Construction Industry – June 2015

Other ModernGraham posts about related companies

Lowe’s Companies Inc Valuation – January 2016 Update $LOW
PulteGroup Inc Valuation – January 2016 Update $PHM
Flowserve Corp Valuation – November 2015 Update $FLS
Lennar Corporation Valuation – November 2015 Update $LEN
Home Depot Inc. Valuation – November 2015 Update $HD
Quanta Services Inc. Valuation – October 2015 Update $PWR
Fluor Corporation Valuation – October 2015 Update $FLR
Martin Marietta Materials Inc. Valuation – October 2015 Update $MLM
Jacobs Engineering Group Analysis – October 2015 Update $JEC
D.R. Horton Inc. Analysis – October 2015 Update $DHI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc. Analysis – October 2015 Update $DHI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how D.R. Horton Inc. (DHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): D.R. Horton, Inc. is the homebuilding company in the United States. The Company constructs and sells homes through its operating divisions in approximately 27 states and 79 metropolitan markets of the United States, under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Breland Homes, Regent Homes and Crown Communities. The Company operates in two segments: Homebuilding and Financial Services. The Company’s homebuilding segment is engaged in the acquisition and development of land and the construction and sale of residential homes. The Company’s homebuilding operations are located in East, Midwest, Southeast, South Central, Southwest and West. The Company’s financial services segment provides mortgage financing and title agency services to the Company’s homebuilding customers. The Company’s homebuilding assets include approximately 350 lots, 90 homes in inventory and 40 homes.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of DHI

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,124,386,812 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -171.68% Fail
6. Moderate PEmg Ratio PEmg < 20 17.73 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.00 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.51 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

DHI value chart October 2015

EPSmg $1.71
MG Growth Estimate 15.00%
MG Value $65.86
Opinion Undervalued
MG Value based on 3% Growth $24.80
MG Value based on 0% Growth $14.54
Market Implied Growth Rate 4.61%
Current Price $30.33
% of Intrinsic Value 46.05%

D.R. Horton Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.33 in 2011 to an estimated gain of $1.71 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.61% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on D.R. Horton Inc. (DHI)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

DHI charts October 2015

Net Current Asset Value (NCAV) $9.98
Graham Number $26.15
PEmg 17.76
Current Ratio 6.33
PB Ratio 2.00
Dividend Yield 0.83%
Number of Consecutive Years of Dividend Growth 2

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $8,928,500,000
Total Current Liabilities $1,411,400,000
Long-Term Debt $3,821,100,000
Total Assets $10,863,500,000
Intangible Assets $97,000,000
Total Liabilities $5,233,900,000
Shares Outstanding (Diluted Average) 370,300,000

Earnings Per Share History

Next Fiscal Year Estimate $1.98
Sep14 $1.50
Sep13 $1.33
Sep12 $2.77
Sep11 $0.23
Sep10 $0.77
Sep09 -$1.73
Sep08 -$8.34
Sep07 -$2.27
Sep06 $3.90
Sep05 $4.62
Sep04 $3.09
Sep03 $2.05
Sep02 $1.44
Sep01 $1.11
Sep00 $0.84
Sep99 $0.69
Sep98 $0.47
Sep97 $0.32
Sep96 $0.24

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.71
Sep14 $1.49
Sep13 $1.22
Sep12 $0.35
Sep11 -$1.33
Sep10 -$1.92
Sep09 -$2.43
Sep08 -$1.78
Sep07 $1.76
Sep06 $3.52
Sep05 $3.04
Sep04 $2.07
Sep03 $1.45
Sep02 $1.07
Sep01 $0.82
Sep00 $0.62
Sep99 $0.45

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Construction Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 7/25/15
D.R. Horton Inc. Analysis – July 2015 Update $DHI
The Best Companies of the Construction Industry – June 2015
D.R. Horton Inc. Quarterly Valuation – April 2015 $DHI

Other ModernGraham posts about related companies

The Best Companies of the Construction Industry – October 2015
Mohawk Industries Inc. Analysis – October 2015 Update $MHK
PulteGroup Inc. Analysis – October 2015 Update $PHM
Masco Corporation Analysis – September 2015 Update $MAS
Flowserve Corporation Analysis – August 2015 Update $FLS
Alexander & Baldwin Inc Analysis – Initial Coverage $ALEX
Lennar Corporation Analysis – August 2015 Update $LEN
Aecom Analysis – Initial Coverage $ACM
Quanta Services Inc. Analysis – July 2015 Update $PWR
Fluor Corporation Analysis – July 2015 Update $FLR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

D.R. Horton Inc. Analysis – July 2015 Update $DHI

DR_Horton_LogoD.R. Horton Inc. (DHI) has shown significant earnings growth over the last several years, a factor that immediately attracts some investors. In addition, multiple analysts have been raving about the value opportunity and believe the company to have strong potential. For example, Seeking Alpha contributor Anup Singh recently wrote regarding the company’s growth potential as the housing market continues to improve. On the other hand, Harsh Singh Chauhan wrote in April that the company’s margins will continue to be pressured due to a focus on entry-level homes. These qualitative issues are excellent to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

[level-free]
To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
[level-mg-stocks-screens-subscriber]

Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – FAIL
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $27.43
MG Value $63.42
MG Opinion Undervalued
Value Based on 3% Growth $23.89
Value Based on 0% Growth $14.00
Market Implied Growth Rate 4.08%
Net Current Asset Value (NCAV) $9.61
PEmg 16.65
Current Ratio 6.57
PB Ratio 1.87

Balance Sheet – March 2015

Current Assets $8,845,000,000
Current Liabilities $1,347,000,000
Total Debt $3,946,000,000
Total Assets $10,713,000,000
Intangible Assets $95,000,000
Total Liabilities $5,295,000,000
Outstanding Shares 369,400,000

Earnings Per Share

2015 (estimate) $1.79
2014 $1.50
2013 $1.33
2012 $2.77
2011 $0.23
2010 $0.77
2009 -$1.73
2008 -$8.34
2007 -$2.27
2006 $3.90
2005 $4.62

Earnings Per Share – ModernGraham

2015 (estimate) $1.65
2014 $1.49
2013 $1.22
2012 $0.35
2011 -$1.33
2010 -$1.92

Dividend History

Conclusion

D.R. Horton is not suitable for Defensive Investors but it does pass the initial requirements of the Enterprising Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last 10 years, while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from a loss of $1.33 in 2011 to an estimated gain of $1.65 for 2015. This is a fairly strong level of demonstrated growth and outpaces the market’s implied estimate for annual earnings growth of only 4.08% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged considerably more than the market’s estimate annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that D.R.Horton is significantly undervalued at the present time, a result which is in line with some of its peers.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

D.R. Horton Inc. Quarterly Valuation – April 2015 $DHI

DR_Horton_LogoD.R. Horton Inc. (NYSE:DHI) has shown very strong earnings growth over the last several years, which will immediately intrigue many investors. However, Benjamin Graham, the father of value investing, taught that investors must take emotion out of the equation, as the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here is a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

DHI Chart

DHI data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
[/level-free]
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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – FAIL
  6. Moderate PEmg (price over normalized earnings) ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $28.46
MG Value $62.40
MG Opinion Undervalued
Value Based on 3% Growth $23.50
Value Based on 0% Growth $13.78
Market Implied Growth Rate 4.53%
Net Current Asset Value (NCAV) $9.41
PEmg 17.56
Current Ratio 6.34
PB Ratio 1.99

Balance Sheet – December 2014

Current Assets $8,540,000,000
Current Liabilities $1,348,000,000
Total Debt $3,727,000,000
Total Assets $10,339,000,000
Intangible Assets $95,000,000
Total Liabilities $5,078,000,000
Outstanding Shares 368,100,000

Earnings Per Share

2015 (estimate) $1.71
2014 $1.50
2013 $1.33
2012 $2.77
2011 $0.23
2010 $0.77
2009 -$1.73
2008 -$8.34
2007 -$2.27
2006 $3.90
2005 $4.62

Earnings Per Share – ModernGraham

2015 (estimate) $1.62
2014 $1.49
2013 $1.22
2012 $0.35
2011 -$1.33
2010 -$1.92

Dividend History

DHI Dividend Chart

DHI Dividend data by YCharts

Conclusion

D.R. Horton Inc. performs well in the ModernGraham model and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.33 in 2011 to an estimated $1.62 for 2015. This is a strong level of demonstrated growth, which is well above the market’s implied estimate of 4.53% annual earnings growth over the next 7-10 years. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still estimates a growth figure much higher than the market’s implied rate. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

[/level-mg-stocks-screens-subscriber]

D.R. Horton Inc. Quarterly Valuation – January 2015 $DHI

DR_Horton_Logo

D.R. Horton does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.92 in 2010 to an estimated gain of $1.49 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 3.93% annual earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 36% per year, which is clearly unsustainable over the long term. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of D.R. Horton Inc. (DHI) for greater perspective!

Read the full valuation on Seeking Alpha!

DHI Chart

DHI data by YCharts

Disclaimer:  The author did not hold a position in D.R. Horton Inc. (DHI) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

D&R Horton Inc. Quarterly Stock Valuation – October 2014 $DHI

DR_Horton_LogoBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how D.R. Horton Inc. (DHI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): D.R. Horton, Inc. is the homebuilding companies in the United States. The Company constructs and sells homes through its operating divisions in 27 states and 78 metropolitan markets of the United States, primarily under the name of D.R. Horton, America’s Builder. During the fiscal year ended September 30, 2013 (fiscal 2013), the Company closed 24,155 homes. Through its financial services operations, the Company provides mortgages financing and title agency services to homebuyers in many of its homebuilding markets. DHI Mortgage, its 100% owned subsidiary, provides mortgage financing services primarily to the Company’s homebuilding customers and generally sells the mortgages it originates and the related servicing rights to third-party purchasers. In May 2014, the Company acquired homebuilding operations of Crown Communities.
DHI Chart

DHI data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 - PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 - PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 - PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend - PASS
  5. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $20.31
MG Value $42.97
MG Opinion Undervalued
Value Based on 3% Growth $16.18
Value Based on 0% Growth $9.49
Market Implied Growth Rate 4.85%
Net Current Asset Value (NCAV) $10.44
PEmg 18.20
Current Ratio 6.82
PB Ratio 1.49

Balance Sheet – 6/30/2014

Current Assets $8,553,300,000
Current Liabilities $1,255,000,000
Total Debt $3,445,300,000
Total Assets $9,716,600,000
Intangible Assets $94,800,000
Total Liabilities $4,750,400,000
Outstanding Shares 364,400,000

Earnings Per Share

2014 (estimate) $1.60
2013 $1.33
2012 $0.73
2011 $0.23
2010 $0.77
2009 -$1.73
2008 -$8.34
2007 -$2.27
2006 $3.90
2005 $4.62
2004 $3.08

Earnings Per Share – ModernGraham

2014 (estimate) $1.12
2013 $0.67
2012 -$0.33
2011 -$1.33
2010 -$1.92
2009 -$2.43

Dividend History
DHI Dividend Chart

DHI Dividend data by YCharts

Conclusion:

D&R Horton Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the company’s lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.92 in 2010 to an estimated gain of $1.12 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.85% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value abovethe price.

Be sure to check out previous ModernGraham valuations of D&R Horton Inc. (DHI) for better perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on D&R Horton Inc. (DHI)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in D&R Horton Inc. (DHI) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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