What Does D.R. Horton, Inc.'s (NYSE:DHI) Share Price Indicate?
Today we're going to take a look at the well-established D.R. Horton, Inc. (NYSE:DHI). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at D.R. Horton’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for D.R. Horton
What's the opportunity in D.R. Horton?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.21% above my intrinsic value, which means if you buy D.R. Horton today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $74.35, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because D.R. Horton’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of D.R. Horton look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. D.R. Horton's earnings over the next few years are expected to increase by 45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? DHI’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on DHI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about D.R. Horton as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for D.R. Horton and we think they deserve your attention.
If you are no longer interested in D.R. Horton, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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