Tri Pointe Homes Inc. (TPH) Hit a 52 Week High, Can the Run Continue?

·4 min read

Have you been paying attention to shares of Tri Pointe Homes (TPH)? Shares have been on the move with the stock up 13.9% over the past month. The stock hit a new 52-week high of $30.72 in the previous session. Tri Pointe Homes has gained 64.6% since the start of the year compared to the 16.6% move for the Zacks Construction sector and the 34.5% return for the Zacks Building Products - Home Builders industry.

What's Driving the Outperformance?

The stock has an impressive 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 April 27, 2023, Tri Pointe reported EPS of $0.73 versus consensus estimate of $0.42 while it beat the consensus revenue estimate by 19.27%.

For the current fiscal year, Tri Pointe is expected to post earnings of $3.07 per share on $3.36 billion in revenues. This represents a -44.58% change in EPS on a -21.81% change in revenues. For the next fiscal year, the company is expected to earn $3.80 per share on $3.84 billion in revenues. This represents a year-over-year change of 23.94% and 14.56%, respectively.

Valuation Metrics

Tri Pointe 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 has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort 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.

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

In terms of its value breakdown, the stock currently trades at 10X current fiscal year EPS estimates, which is a premium to the peer industry average of 9.4X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 5.5X. Additionally, the stock has a PEG ratio of 0.77. 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 consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Tri Pointe 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 Tri Pointe meets the list of requirements. Thus, it seems as though Tri Pointe shares could still be poised for more gains ahead.

How Does TPH Stack Up to the Competition?

Shares of TPH have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is KB Home (KBH). KBH has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of D, and a Momentum Score of C.

Earnings were strong last quarter. KB Home beat our consensus estimate by 38.10%, and for the current fiscal year, KBH is expected to post earnings of $5.27 per share on revenue of $5.59 billion.

Shares of KB Home have gained 10.9% over the past month, and currently trade at a forward P/E of 8.74X and a P/CF of 4.61X.

The Building Products - Home Builders industry is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for TPH and KBH, even beyond their own solid fundamental situation.

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