Beazer Homes USA Inc. Message Board

  • kramac03 kramac03 Aug 4, 2007 9:07 PM Flag

    Motley's fair value is 10.25 and under


    By my conservative assumptions, I value Beazer's assets at the following amounts:

    Cash is cash, so its value is $128 million.
    Inventory is one of the problems. With further writedowns, assuming 80 cents on the dollar, inventory is worth $2.64 billion.
    Accounts receivable, after some charges, are worth $60 million.
    Goodwill is worth zero.
    PPE would probably fetch around $18 million to $20 million in a fire sale.
    Mortgages, at 80 cents on the dollar, are worth about $8.2 million.
    Other assets, namely joint-venture investments and deferred tax assets at 85 cents on the dollar, are worth $112 million.
    The revalued assets come to approximately $3 billion, leaving an equity value of just above $400 million, or about $10.25 per share in book value, versus today's stock price of around $12.50 a share. These valuations are merely assumptions based on my assessment of the overall industry's economics, and they serve only to illustrate that the plunge in prices assumes further writedowns and, hence, a reduction in book value. To properly assess most homebuilders, a similar balance-sheet analysis would need to be done to fairly compare all of the companies.

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    • I see we come to roughly the same bottom line. I did a similar exercise a little while back and recent earnings haven't changed my outlook.

      I think chances are good Beazer can go to the single digits as reality sets in as to how bad the environment for homebuilders will be in the coming months (and years).

    • I just read that Motley Fool piece and its very good. Assuming the worst is what they did so at these prices paying a buck and change over book looks like a risk worth taking. Paying the dividend surprised me but if they believe they have the ability to do it and still be in a comfortable position then its possible they are indicating things will get a bit better down the road. July might have been not so bad a month but who knows. Really depends on what mkts you operate in and what your exposure is. I live in Atlanta and we are down but we never got the absurd appreciation that other areas of the country got to like Florida for example. I know some local builders who have been around a long time, they are still building houses just 40% less of them and don't forget these guys were printing it for years. This industry will consolidate I am 53 and I remember the last downturn which lasted a while but the strong ones came out on top.

    • with this approach; other builders (such as CTX valued at $21/sh) are very expensive.

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