M/I Homes: A Great Home For Your Cash

Core Viewpoint - M/I Homes has shown significant stock performance, with a 235.4% increase since early January 2023, outperforming the S&P 500's 46.3% rise during the same period, and a 258.6% increase since being rated a 'buy' in August 2022 [1] Financial Performance - In 2022, M/I Homes reported revenue of $4.13 billion, which declined to $4.03 billion in 2023, reflecting a year-over-year decrease of 2.4% [3] - The average price of homes delivered increased from $479,000 to $483,000, but deliveries fell from 8,366 to 8,112 homes due to inflation and high interest rates [3] - Net income decreased from $490.7 million to $465.4 million, while operating cash flow surged from $184.1 million to $552.1 million, with adjusted operating cash flow showing a modest increase from $551.8 million to $566.5 million [4] - EBITDA fell from $705.4 million to $648.2 million [4] Contracts and Backlog - New contracts surged to 7,977 homes in 2023, up from 6,668 homes in 2022, but the backlog decreased from 3,137 homes to 3,002 homes [5] - The cancellation rate improved from 14.3% to 11.4%, but the average price of homes in backlog fell from $541,000 to $525,000 [5] Recent Developments - In the first half of 2024, revenue was $2.16 billion, an increase from $2.01 billion in the same period of 2023, driven by an increase in homes delivered from 3,997 to 4,382 [6] - Despite a decline in the average price of homes delivered from $489,000 to $477,000, net income rose by 28.8% from $221.1 million to $284.8 million [7] - Backlog improved to 3,422 homes by the end of the second quarter of 2024, although still down from 3,508 homes at the end of the second quarter of 2023 [7] Valuation and Market Position - M/I Homes is considered cheap relative to peers, with a price-to-earnings ratio of 7.5, compared to higher ratios for competitors [9] - Potential upside for shares ranges from 46.3% to 81.3% based on various valuation metrics, while downside risk is limited to 6.7% [8] Share Repurchase Program - The company announced a $250 million share repurchase program, having already repurchased $75.6 million worth of stock year-to-date, with net debt at only $79.7 million [10] Overall Outlook - The overall picture for M/I Homes is considered positive despite mixed fundamentals, with a bullish outlook maintained due to attractive valuations [11]