M/I Homes Stock Rises 37% in Three Months: Still a Buy or Too Late?

Core Viewpoint - M/I Homes, Inc. (MHO) has experienced a significant stock rally, gaining 36.8% over the past three months, outperforming both the Zacks Building Products - Home Builders industry and the broader S&P 500 Index [1][2][4] Performance Summary - MHO's stock performance of 36.8% exceeds the Zacks Building Products - Home Builders industry's 29.4% rise, the Construction sector's 18.9%, and the S&P 500 Index's 1.4% [1][3] - The stock is currently trading above its 50-day and 200-day moving averages, indicating strong investor confidence [4] Demand and Market Position - M/I Homes has successfully met sustained demand despite economic challenges, particularly among millennials and Gen Z buyers [2][6] - The company serves a broad segment of the housing market, including first-time, move-up, luxury, and empty-nester buyers, with a focus on affordability [6][7] - M/I Homes has a diverse geographic presence in high-demand markets such as Texas, Florida, and North Carolina, allowing it to capitalize on regional growth trends [6] Financial Health and Growth Strategy - The company has a robust land acquisition strategy, controlling 23,000 owned lots and 49,000 controlled lots, providing a solid foundation for future growth [8] - M/I Homes ended the second quarter with $837 million in cash and no borrowings under its revolving credit facility, indicating a strong balance sheet [8] - Shareholder equity rose 19% to $2.7 billion in the second quarter, reflecting prudent capital management [10] Challenges and Cost Management - Rising labor and material costs pose challenges for the homebuilding industry, including M/I Homes [11] - The company has seen increased land acquisition costs, with land purchases rising from $96 million to $119 million and development spending increasing to $144.5 million from $108.9 million year-over-year [14] - M/I Homes is offering below-market financing incentives to maintain sales momentum, which may pressure margins [13] Valuation and Earnings Outlook - MHO stock is currently undervalued compared to its industry peers, with a Value Score of A [15] - The trailing 12-month return on equity for MHO is 20.5%, surpassing the industry average of 18.3% [16] - There are positive estimate revisions for 2024 earnings per share (EPS), indicating a projected growth of 21.9% [19]