Dream Finders (DFH) Surges 143% YTD: What's Driving the Stock?
Dream Finders Homes, Inc. DFH is gaining from the lack of existing house supply and improving demand patterns. The U.S. housing market is currently normalizing, as a result of which demand for new homes has improved.
Apart from these tailwinds, the company’s focus on accretive acquisitions and increasing affordability through its mortgage partner, Jet HomeLoans LLC., has immensely contributed to its growth momentum, even during uncertain macroeconomic conditions.
Shares of this Zacks Rank #1 (Strong Buy) homebuilding company have surged 142.8% in the year-to-date period, outperforming the Zacks Building Products - Home Builders industry’s 30.1% growth.
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Adding to the analyst’s bullish sentiments, this new home construction company delivered a trailing four-quarter earnings surprise of 122.7%, on average. Earnings estimates for 2023 have moved north to $2.29 per share from $2.02 per share in the past 60 days.
Furthermore, solidifying this prospect, the company portrays a VGM Score of A, backed by a Value Score of B and a Growth Score of B.
Here’s What Makes the Stock Attractive
Increasing Demand Trends: Dream Finders’ top line is witnessing impressive growth, which is attributable to the improving demand patterns for new homes. The lack of existing house inventory boosted this uptrend accompanied by a normalizing housing market.
Given this housing market scenario, in second-quarter 2023, the company witnessed a 16% year-over-year rise in net new orders to 1,655. This was supported by higher home closings and average sales price of homes closed, reflecting an increase of 12% to 1,846 and 9% to $504,683, respectively, year over year. These tailwinds drove the quarter’s homebuilding revenues to increase 19% year over year.
The company has optimistic views on the upward trend and intends to maintain it with additional support from managing construction times and increasing inventory turnover.
Profitable Acquisitions: The company is notably benefiting from its accretive buyouts, which it has completed in the past few years. Apart from acquisitions, Dream Finders' growth strategy pivots around organic expansion plans, which help in additional margin expansion.
In October 2021, the company acquired the homebuilding, mortgage banking and title insurance assets of privately-held Texas homebuilder McGuyer Homebuilders, Inc. This buyout came with a backlog of more than 1,845 homes with a value in excess of $1 billion with 5,500 lots under control along with increased geographical reach. Furthermore, in October 2020, it acquired H&H Constructors of Fayetteville, LLC, which extended its product offerings to the first-time and move-up market. Also, this expanded its geographical reach in high-growth markets, Raleigh and Charlotte.
Buying Homes Made Easier: Dream Finders’ mortgage partner, Jet HomeLoans, offers various loan programs to potential homebuyers to make mortgage payments hassle-free. Through this joint venture, the company ensures the affordability of homes, even during uncertain economic conditions.
The diversified loan options are conditioned to cater to the differentiated needs and financial conditions of the potential buyers. This boosts the sales volume as the customers are thoroughly educated on the programs and the company closely monitors its product offerings at the community level to ensure competitive pricing.
Higher ROE: Dream Finders’ trailing 12-month return on equity (ROE) is indicative of its growth potential. The company’s ROE of 41.1% compares favorably with the industry’s 19.1%, which signals more efficiency in using shareholders’ funds than peers.
Other Key Picks
Some other top-ranked stocks from the Construction sector are Installed Building Products, Inc. IBP, Construction Partners, Inc. ROAD and Toll Brothers, Inc. TOL.
Installed Building currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
IBP delivered a trailing four-quarter earnings surprise of 5.5%, on average. Shares of the company have risen 38.4% in the past year. The Zacks Consensus Estimate for IBP’s 2023 sales and earnings per share (EPS) indicates growth of 4.7% and 8.6%, respectively, from the previous year’s reported levels.
Construction Partners currently sports a Zacks Rank of 1. ROAD delivered a trailing four-quarter earnings surprise of 10.6%, on average. Shares of the company have gained 33.4% in the past year.
The Zacks Consensus Estimate for ROAD’s fiscal 2024 sales and EPS indicates growth of 14.6% and 47.1%, respectively, from the previous year’s reported levels.
Toll Brothers currently sports a Zacks Rank of 1. TOL delivered a trailing four-quarter earnings surprise of 31.4%, on average. Shares of the company have surged 66.3% in the past year.
The Zacks Consensus Estimate for TOL’s fiscal 2024 sales and EPS indicates growth of 4% and 1.5%, respectively, from the previous year’s reported levels.
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Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Installed Building Products, Inc. (IBP) : Free Stock Analysis Report
Construction Partners, Inc. (ROAD) : Free Stock Analysis Report
Dream Finders Homes, Inc. (DFH) : Free Stock Analysis Report
