Zacks Investment Ideas feature highlights: M.D.C. Holdings, Ryland Group and
CHICAGO, Aug. 19, 2013
CHICAGO, Aug. 19, 2013 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: M.D.C. Holdings, Inc.(NYSE:MDC-Free Report), Ryland
Group Inc.(NYSE:RYL-Free Report) and Meritage Homes(NYSE:MTH-Free Report).
Value Investors: Buy Housing Now
Housing stocks were the darling of 2012 and started off 2013 on a hot streak.
But in May, the stocks peaked and it's been downhill ever since even though
many of the homebuilders have reported better than expected earnings and the
year over year earnings growth is expected to be phenomenal.
The homebuilders are a classic case of what was once hot is now not.
But the sell off has created an opportunity for the savvy value investor.
In May, many were concerned about excessive valuations of the homebuilders as
they hit new highs, but that's not the case now that the stocks have plunged.
Far from it.
There's plenty of value to be found in many of the homebuilders. Not only
that, you can get double digit earnings growth and an attractive Zacks Rank.
If you loved the homebuilder stocks as they were going up just a few months
ago, now's your chance to get them while they're cheap.
Homebuilders are Confident
If anything, the fundamentals in the sector have actuallyimprovedsince the
stocks peaked in the spring. On Aug 15, the Homebuilders Confidence Index hit
an 8-year high as it rose to 59 from 56 in July. The homebuilders haven't been
this confident since the housing boom and bubble years.
They have a reason to be confident. Housing inventories, both new and
existing, are running a multi-year lows in most major markets yet low interest
rates and record stock prices, which have boosted confidence, have spurred
The builders are buying land again and have pricing power in many states.
One fly in the ointment may be rising mortgage rates, but even at 5%, mortgage
rates would still be near all-time lows. Homebuyers have been in hibernation
for 7 years. 2013 has been the first year where buyers have appeared and the
demand has not been temporary.
The homebuilders believe the momentum will continue into 2014. The pieces are
in place. We're in the early stages of the housing recovery.
There will be hiccups. But now is a chance to get some of the homebuilders at
3 Best Values in Housing
M.D.C. Holdings Inc.
Ryland Group Inc.
1. M.D.C. Holdings, Inc.(NYSE:MDC-Free Report)
M.D.C. Holdings is one of the larger U.S. homebuilders with 140 communities in
many of the hot major metropolitan markets such as Washington DC, Phoenix, Las
Vegas, the Bay Area and Southern California.
On July 30, it reported second quarter results which saw revenue up 56%. The
number of homes delivered rose 37% to 1183 as the average selling price jumped
14% to $338,400. Monthly absorption was at the highest level since 2006.
Forward P/E = 11.3
P/B = 1.2
P/S = 0.9
2013 expected earnings growth of 108%
Zacks Rank #3 (Hold)
2. Ryland Group Inc.(NYSE:RYL-Free Report)
Ryland is one of the most recognizable homebuilders in the country. It
operates in 14 states.
On July 24, it reported second quarter results where revenue soared 67.8% year
over year. New orders rose 56.7% to 2,191 from 1,398 in the second quarter of
last year. The average closing price jumped 13% to $287,000.
For the first six months of 2013, gross profit margin was 20%, up from 18.2%
for the same period in 2012.
Housing gross profit margin was 20.0 percent for the six months ended June 30,
2013, compared to 18.2 percent for the six months ended June 30, 2012.
Forward P/E = 5.2
P/B = 2.0
P/S = 1.2
2013 expected earnings growth of 558%
Zacks Rank #2 (Buy)
3. Meritage Homes(NYSE:MTH-Free Report)
Meritage Homes is the 9th largest public homebuilder in the United States. It
concentrates in the West, South and the Southeastern U.S. As of June 30, it
had 165 actively selling communities.
Like its competitors, the second quarter was a strong one for Meritage. It
reported second quarter results on July 24 which saw home closing revenue jump
55% year over year. The average sale price rose 23% to $350,000, the highest
in 8 years.
Gross margin rose to 21.5% from 18.5% in the second quarter of a year ago due
to both home price appreciation and the cutting of costs.
Forward P/E = 14.6
P/B = 2.0
P/S = 1.1
2013 expected earnings growth of 117%
Zacks Rank #2 (Buy)
The analysts have been behind on the housing recovery story as Meritage has
put together 5 big beats in a row.
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