DHI Soars 17% In A Single Month, Should You Buy The Stock?

We believe there are several things to fear in DHI stock given its overall Weak operating performance and financial condition. This is aligned with the stock’s Low valuation because of which we think it is Fairly Priced. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $51 Bil in market cap, D.R. Horton operates as a homebuilder offering single-family and attached homes, mortgage financing, title insurance, examination, and closing services across multiple U.S. regions.

[1] Valuation Looks Low

This table highlights how DHI is valued vs broader market. For more details see: DHI Valuation Ratios

[2] Growth Is Very Weak

• D.R. Horton has seen its top line grow at an average rate of 2.9% over the last 3 years
• Its revenues have fallen -7.3% from $37 Bil to $35 Bil in the last 12 months
• Also, its quarterly revenues declined -7.4% to $9.2 Bil in the most recent quarter from $10.0 Bil a year ago.

This table highlights how DHI is growing vs broader market. For more details see: DHI Revenue Comparison

[3] Profitability Appears Moderate

• DHI last 12 month operating income was $4.9 Bil representing operating margin of 14.2%
• With cash flow margin of 8.4%, it generated nearly $2.9 Bil in operating cash flow over this period
• For the same period, DHI generated nearly $4.0 Bil in net income, suggesting net margin of about 11.5%

This table highlights how DHI profitability vs broader market. For more details see: DHI Operating Income Comparison

[4] Financial Stability Looks Strong

• DHI Debt was $7.3 Bil at the end of the most recent quarter, while its current Market Cap is $51 Bil. This implies Debt-to-Equity Ratio of 14.2%
• DHI Cash (including cash equivalents) makes up $2.6 Bil of $36 Bil in total Assets. This yields a Cash-to-Assets Ratio of 7.2%

[4] Downturn Resilience Is Weak

DHI has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• DHI stock fell 44.8% from a high of $109.65 on 10 December 2021 to $60.56 on 17 June 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 28 April 2023
• Since then, the stock increased to a high of $197.06 on 19 September 2024 , and currently trades at $168.96

 
2020 Covid Pandemic

• DHI stock fell 53.6% from a high of $62.05 on 20 February 2020 to $28.78 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 16 July 2020

 
2008 Global Financial Crisis

• DHI stock fell 85.9% from a high of $30.86 on 2 February 2007 to $4.34 on 21 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 August 2015

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read DHI Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.