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Forestar Group (FOR) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Forestar Group (FOR)? Shares have been on the move with the stock up 6.7% over the past month. The stock hit a new 52-week high of $23.11 in the previous session. Forestar Group has gained 6.7% since the start of the year compared to the -0.5% move for the Zacks Finance sector and the 3.5% return for the Zacks Real Estate - Development industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 23, 2020, Forestar Group reported EPS of $0.35 versus consensus estimate of $0.15 while it beat the consensus revenue estimate by 45.84%.

For the current fiscal year, Forestar Group is expected to post earnings of $0.95 per share on $800 million in revenues. This represents a 21.52% change in EPS on a 67.36% change in revenues. For the next fiscal year, the company is expected to earn $1.16 per share on $950 million in revenues. This represents a year-over-year change of 21.88% and 18.75%, respectively.

Valuation Metrics

Forestar Group may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Forestar Group has a Value Score of B. The stock's Growth and Momentum Scores are C and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 23.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 26.9X versus its peer group's average of 10.9X. Additionally, the stock has a PEG ratio of 1.74. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Forestar Group currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Forestar Group fits the bill. Thus, it seems as though Forestar Group shares could still be poised for more gains ahead.

How Does Forestar Group Stack Up to the Competition?

Shares of Forestar Group have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Barratt Developments PLC Unsponsored (BTDPY), Forestar Group (FOR), and Berkeley Group Holdings PLC Unsponsored (BKGFY), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 33% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Forestar Group, even beyond its own solid fundamental situation.

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Forestar Group Inc (FOR) : Free Stock Analysis Report
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