This homebuilder beat analysts’ estimates by $.07 last quarter.
D.R. Horton, Inc. (DHI)
From Validea Hot List Newsletter
Strategy: Growth/Value Investor
Based on: James P. O’Shaughnessy
D.R. Horton, Inc. (DHI) is a homebuilding company. The company has operations in 84 markets in 29 states across the United States. DHI’s segments include its 44 homebuilding divisions, its financial services operations and its other business activities. In the homebuilding segment, The company builds and sells single-family detached homes and attached homes, such as town homes, duplexes, triplexes and condominiums. Its 44 homebuilding divisions are aggregated into six segments: East Region, South Central Region, Midwest Region, West Region, Southwest Region and Southeast Region. In the financial services segment, The company sells mortgages and collects fees for title insurance agency and closing services. It also has subsidiaries that conduct insurance-related operations; construct and own income-producing rental properties; own non-residential real estate, including ranch land and improvements, and own and operate oil and gas-related assets.
MARKET CAP: PASS: The first requirement of the Cornerstone Growth Strategy is that The company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. DHI, with a market cap of $16,129 million, passes this criterion.
EARNINGS PER SHARE PERSISTENCE: PASS: The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company’s earnings must increase each year for a five year period. DHI, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.46, 2.03, 2.36, 2.74 and 4.09, passes this test.
PRICE/SALES RATIO: PASS: The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. DHI’s Price/Sales ratio of 0.97, based on trailing 12 month sales, passes this criterion.
RELATIVE STRENGTH: PASS: The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of The company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. DHI, whose relative strength is 72, is in the top 50 and would pass this last criterion.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, June 28, 2019