If you listened to the CC for Q1, the management painted such a rosy picture for things to come. You'd get the impression they're going to be hugely profitable. Guess what? Wrong.
The company was wrong in forecasting a growing market. There was no growing, b/c there was no pricing improvement. If demand were real, the pricing should also be strong. Even tho I wouldn't use the words, "fire sales", to describe Q2, but when a real estate builder must sell down the inventories at weak prices, it's a troubling indication for the markets they serve.
A real estate builder's cost structure must include the overhead in running the business, which is and will always be much smaller than the cost of the land, building and labors.
I think we have to take a step back here....the good news is that they are on track to meet their revenue goals for 2013 which seemed like a pipe dream not six months ago. They projected a return to profitability this year, not a hugely profitable year. All of us in this for at least the next two years expect this to be a process.
Not to even mention the fact that they opened both major new developments that don't even count towards Q2.
What about this one: Gross new order revenue, consisting of revenue from all units sold, for the three months ended June 30, 2013 was $23.1 million on 48 units as compared to $4.0 million on 14 units for the three months ended June 30, 2012. Gross new order revenue for the six months ended June 30, 2013 increased $33.6 million to $41.4 million on 87 units as compared to $7.8 million on 34 units for the six months ended June 30, 2012.
The bottom line is that this little company is losing money, again.
Growth in sales led to loss of money, which means, basically, they're selling at a discount to their cost bases. That's bad news for a home builder. They have no pricing power. Period, end of the story.