Buy or Sell Tri Pointe Homes Stock?

Tri Pointe Homes (TPH) stock has jumped 27% during the past day, and is currently trading at $46.37. We believe there are several things to fear in TPH 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.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $4.0 Bil in market cap, Tri Pointe Homes provides design, construction, and sale of single-family homes along with mortgage financing, title, escrow, and insurance services across numerous active communities and owned lots.

[1] Valuation Looks Low

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

[2] Growth Is Very Weak

• Tri Pointe Homes has seen its top line shrink at an average rate of -1.6% over the last 3 years
• Its revenues have fallen -17% from $4.5 Bil to $3.8 Bil in the last 12 months
• Also, its quarterly revenues declined -25.3% to $855 Mil in the most recent quarter from $1.1 Bil a year ago.

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

[3] Profitability Appears Weak

• TPH last 12 month operating income was $390 Mil representing operating margin of 10.4%
• With cash flow margin of 8.0%, it generated nearly $301 Mil in operating cash flow over this period
• For the same period, TPH generated nearly $310 Mil in net income, suggesting net margin of about 8.3%

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

[4] Financial Stability Looks Strong

• TPH Debt was $1.3 Bil at the end of the most recent quarter, while its current Market Cap is $4.0 Bil. This implies Debt-to-Equity Ratio of 31.4%
• TPH Cash (including cash equivalents) makes up $792 Mil of $5.0 Bil in total Assets. This yields a Cash-to-Assets Ratio of 15.9%

[5] Downturn Resilience Is Weak

TPH 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

• TPH stock fell 47.0% from a high of $28.02 on 10 December 2021 to $14.85 on 20 October 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 $46.69 on 16 October 2024 , and currently trades at $46.37

 
2020 Covid Pandemic

• TPH stock fell 66.6% from a high of $18.39 on 20 February 2020 to $6.14 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 1 October 2020

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 TPH Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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