D.R. Horton(DHI) The Motley Fool·2024-09-03 10:00Core Viewpoint - D.R. Horton is positioned to benefit from lower interest rates and has shown strong performance, with shares reaching an all-time high following impressive earnings results and favorable macroeconomic conditions [1][2]. Financial Performance - In July, D.R. Horton reported a 2% sales growth and a 5% increase in earnings compared to the previous year, despite weak new orders and a reduced full-year sales forecast [2]. - The company has achieved a 6.8% compound annual sales growth rate (CASGR) since 2004, with net profits, earnings per share, and cash flows growing faster than revenue [3][4]. Competitive Position - D.R. Horton is the largest U.S. homebuilder by revenue, closing over 24,000 units in the most recent quarter, outperforming competitors like Lennar [5]. - The company has diversified its revenue streams through rental operations and financial services, providing more stable cash flows and simplifying the buying process for customers [5][6]. Market Dynamics - Newly built houses constitute approximately one-third of total residential inventory, a significant increase from around 15% before the global financial crisis [7]. - D.R. Horton has gained market share due to its broad geographical footprint and exposure to various price segments, which mitigates reliance on specific economic conditions [6][7]. Valuation - D.R. Horton's stock is considered somewhat expensive relative to peers, with a forward price-to-earnings (P/E) ratio under 13, indicating no significant speculation in the price [8]. - The company maintains strong financial health metrics, including ample liquidity and a reasonable capital structure, which should support it during economic downturns [9].