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What Should You Know About PulteGroup, Inc.’s (NYSE:PHM) Future?

Autumn Haas

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The latest earnings update PulteGroup, Inc. (NYSE:PHM) released in December 2018 suggested that the company benefited from a major tailwind, more than doubling its earnings from the prior year. Below is a brief commentary on my key takeaways on how market analysts perceive PulteGroup’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for PulteGroup

Market analysts’ prospects for next year seems pessimistic, with earnings decreasing by a double-digit -14%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decline of -13% in 2021, eventually reaching US$878m in 2022.

NYSE:PHM Past and Future Earnings, February 22nd 2019

Even though it’s informative understanding the rate of growth each year relative to today’s value, it may be more insightful to analyze the rate at which the earnings are rising or falling every year, on average. The advantage of this technique is that we can get a better picture of the direction of PulteGroup’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -6.7%. This means that, we can presume PulteGroup will chip away at a rate of -6.7% every year for the next few years.

Next Steps:

For PulteGroup, there are three key factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is PHM worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PHM is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PHM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.