3 Homebuilder Stocks Priced Under $50 to Buy Today Despite turbulent market conditions and escalating interest rates, the long-term outlook for the housing market remains bright. Hence, it could be wise to scoop up the homebuilder stocks Five Point...
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Despite turbulent market conditions and escalating interest rates, the long-term outlook for the housing market remains bright. Hence, it could be wise to scoop up the homebuilder stocks Five Point Holdings (FPH), Taylor Morrison Home Corporation (TMHC), and Sekisui House (SKHSY), trading under $50. Read more….
Despite escalating home prices, the housing market remains robust due to sustained demand from homeowners. Therefore, quality homebuilder stocks Five Point Holdings, LLC (FPH), Taylor Morrison Home Corporation (TMHC), and Sekisui House, Ltd. (SKHSY), trading under $50, could be solid buys now.
The upbeat trend continued in August when new home sales increased 5.8% year-over-year. The National Association of Realtors reported a record-setting share of homes.
It anticipates a 12.3% rise in new-home sales this year and an impressive 13.9% jump in 2024 as builders ramp up efforts to meet this growing demand by adding more incentives to lure potential buyers. The limited availability of existing homes is driving this shift, leading buyers to explore new home options.
The U.S. home prices continue their ascent, notching a record high in July, the sixth successive month of gains, due to historically low inventories driving up home costs. This surge in home prices could lead to swelling profit margins for builders and bolster demand for new builds from prospective homeowners seeking affordable alternatives.
The U.S. residential construction market is anticipated to reach $8.31 trillion, growing at a CAGR of 4.8% by 2032.
Considering these conducive trends, let's take a look at the fundamentals of the three best Homebuilders stocks, starting with number 3.
Stock#3: Five Point Holdings, LLC (FPH)
FPH designs and develops large mixed-use planned communities that combine residential, commercial, retail, educational, and recreational elements with public amenities, including civic areas for parks and open space.
FPH’s trailing-12-month net income margin of 43.51% is 287.9% higher than the industry average of 11.22%, while its trailing-12-month ROCE of 4.13% is 7.9% higher than the industry average of 3.83%. Also, its trailing-12-month cash per share of $2.79 is 328.1% higher than the industry average of $0.65.
In terms of trailing-12-month Price/Sales, FPH is trading at 3.35x, 18.3% lower than the industry average of 4.10x. The stock’s trailing-12-month Price/Book multiple of 0.31 is 75.9% lower than the industry average of 1.30.
For the fiscal second quarter that ended June 30, 2023, FPH’s total revenue stood at $21.35 million, up 295.9% year-over-year. Net income attributable to the company and net income per class A share came in at $23.57 million and $0.34, compared to a net loss and net loss attributable to the company per class A share of $5.11 million and $0.07 in the year-ago quarter, respectively.
As of June 30, 2023, FPH’s cash and cash equivalents stood at $193.20 million, compared to $131.77 million as of December 31, 2022.
The stock has gained 27.5% year-to-date to close the last trading session at $2.97. Over the past six months, it has returned 26.9%.
FPH’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth. In the B-rated Homebuilders industry, it is ranked #5 out of the 24 stocks.
To see additional POWR Ratings for Value, Momentum, Stability, Sentiment, and Quality for FPH, click here.
Stock #2: Taylor Morrison Home Corporation (TMHC)
TMHC designs, builds, and sells single and multi-family detached and attached homes and develops lifestyle and master-planned communities. In addition, it creates and constructs multi-use properties consisting of commercial space, retail, and multi-family properties under the Urban Form brand name. Also, it offers customers financial services, title services, and homeowner’s insurance policies.
TMHC is developing a large build-to-rent project in north Charlotte. It confirmed plans for that project, named Yardly Alexandriana. The build-to-rent community calls for 353 units on a site at Alexandriana Road and Northlake Centre Parkway.
According to Mecklenburg County real estate records, entities affiliated with TMHC acquired over 48 acres at the project site earlier this month. The homebuilder paid $18.2 million for the land.
TMHC’s trailing-12-month cash from operations of $1.52 billion is 578.9% higher than the industry average of $223.80 million. Also, its trailing-12-month ROCE, ROTC, and ROTA of 21.85%, 12.03%, and 11.55% are 91.8%, 97.9%, and 200.1% higher than the industry averages of 11.39%, 6.08%, and 3.85%, respectively.
In terms of forward non-GAAP P/E, TMHC is trading at 6.12x, 57.1% lower than the industry average of 14.26x. The stock’s forward price/sales multiple of 0.66 is 21.2% lower than the industry average of 0.84.
For the fiscal second quarter that ended June 30, 2023, TMHC’s total revenue stood at $2.06 billion, up 3.3% year-over-year. The company’s adjusted net income and adjusted earnings per common share stood at $234.60 million and $2.12, respectively. Its adjusted EBITDA stood at $354.80 million.
For the six months that ended June 30, 2023, cash, cash equivalents, and restricted cash stood at $1.23 billion, up 223.8% year-over-year.
Street expects TMHC’s revenue and EPS for the third quarter ending September 2023 to come at $1.65 billion and $1.53, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters and revenue estimates in three of the trailing four quarters.
The stock has gained 40.4% year-to-date to close the last trading session at $42.61. Over the past year, it gained 79.9%.
It’s no surprise that TMHC has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Quality. It is ranked #3 within the same industry.
In addition to the POWR Ratings we stated above, we also have TMHC’s ratings for Growth, Stability, and Sentiment. Get all TMHC ratings here.
Stock #1: Sekisui House, Ltd. (SKHSY)
Headquartered in Osaka, Japan, SKHSY designs, constructs, and contracts built-to-order detached houses. The company operates through Custom Detached Houses; Rental Housing; Architectural/Civil Engineering; Remodeling, Real Estate Management Fees; Houses for Sale, Condominiums, Urban Redevelopment, and Overseas segments.
Between September 1, 2023, and September 27, 2023, the company repurchased 1,551,700 shares for ¥4.75 billion ($31.82 million).
In terms of forward EV/Sales, SKHSY is trading at 0.79x, 30.4% lower than the industry average of 1.13x. The stock’s forward Price/Sales multiple of 0.63 is 24.71% lower than the industry average of 0.84.
SKHSY’s trailing-12-month net income margin of 5.83% is 32.6% higher than the industry average of 4.40%. Also, its trailing-12-month ROTC and ROTA of 6.19% and 5.28% are 1.9% and 37.1% higher than the industry averages of 6.08% and 3.85%, respectively.
For the six months that ended July 31, 2023, SKHSY’s net sales stood at ¥1.46 trillion ($9.79 billion), up 2.7% year-over-year. The company’s gross profit and operating income stood at ¥293.37 billion ($1.96 billion) and ¥124.92 billion ($836.47 million), respectively. Its profit stood at ¥94.62 billion ($633.61 million).
As of July 31, 2023, SKHSY’s total current assets stood at ¥2.37 trillion ($15.89 billion), compared to ¥2.09 trillion ($14.02 billion) as of January 31, 2023.
Analysts expect SKHSY’s revenue for the fiscal third quarter ending October 2023 to be $5.09 billion. Further, it is projected to reach $20.83 billion in the current year (ending January 2024), reflecting an improvement of 135.6% year-over-year.
The stock has gained 14.7% year-to-date to close the last trading session at $20.00. Over the past year, it has returned 22.1%.
SKHSY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Momentum, Stability, and Quality. Within the B-rated Homebuilders industry, SKHSY is ranked first.
Click here to see the other ratings of SKHSY for Growth and Sentiment.
What To Do Next?
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SKHSY shares were trading at $20.00 per share on Monday morning, down $0.32 (-1.57%). Year-to-date, SKHSY has gained 14.74%, versus a 12.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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