You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Welcome to Episode #383 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
The Federal Reserve has finally started cutting interest rates. It announced a 50-basis point cut in Sep 2024.
Fed rate cuts usually impact mortgage rates, although mortgage rates had already been falling heading into the latest FOMC meeting. 30-year fixed mortgage rates have fallen about a point to 6.14% from 7.24%.
This means more buyers can afford a home. As long as the employment market remains stable, home sales should rise in 2025.
Homebuilders Stocks Soar but are Still Cheap
The homebuilder stocks have soared in 2024 as demand remained strong for new homes and in anticipation of mortgage rates falling and home sales rising.
Most of the homebuilders trade with forward price-to-earnings (P/E) ratios under 12. This is extremely cheap as the S&P 500 is trading at 19.9.
Is there still more gas left in the tank with these stocks?
Screening for Top Homebuilder Stocks
The homebuilders have their own industry so you can set up a screen that looks for stocks in that industry with a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Those are the top two Zacks recommendations.
There are 16 stocks in the homebuilder industry on Zacks. At the time of the podcast recording, only one was a Zacks Rank #1 (Strong Buy) and 4 are #2 (Buy) stocks.
All 5 of them are also cheap, even without screening for price-to-earnings (P/E) or some other valuation metric.
Century Communities is one of the nation’s largest homebuilders with a market cap of $3.3 billion. It recently became a top 5 builder in Houston but serves many markets. In the second quarter of 2024, net new contracts were up 20% year-over-year and that was before the Fed cut rates.
Shares of Century Communities have soared 53% over the last year but it’s still cheap with a forward P/E of just 9.8.
Century Communities is a Zacks Rank #1 (Strong Buy) stock.
Should Century Communities be on your homebuilder short list?
M/I Homes is a national homebuilder with a market cap of $4.6 billion. In the second quarter of 2024, gross margins rose to 28% from 25% in the prior year’s quarter.
Shares of M/I Homes have jumped 87% in the last year. It is still dirt cheap however. M/I Homes trades with a forward P/E of just 8.4.
At the time of the recording of the podcast. M/I Homes was a Zacks #2 (Buy) stock but is now a #1 (Strong Buy) stock.
Should M/I Homes be on your homebuilder short list?
Meritage Homes is the 5th largest homebuilder in the United States. It has a market cap of $7.4 billion.
Shares of Meritage Homes have gained 56% in the last year. But it, too, remains dirt cheap with a forward P/E of just 9.7. Meritage Homes also pays a dividend, yielding 1.5%.
Meritage Homes is a Zacks Rank #2 (Buy) stock.
Should Meritage Homes be on your homebuilder short list?
PulteGroup is the largest publicly traded homebuilder in the United States with a market cap of $29.2 billion. It builds under the Centex, Pulte and Del Webb brands, among others. Last quarter, it had an incredible gross margin of 29.9%.
Shares of PulteGroup have soared 84% in the last year, hitting new highs. Yet it remains attractively priced with a forward P/E of 10.5. Pulte pays a dividend, yielding 0.6%. It also has a share repurchase program.
Pulte is a Zacks Rank #2 (Buy) stock.
Should the large homebuilders like Pulte be on your short list?
Taylor Morrison Home is a large homebuilder with a market cap of $7.3 billion. In the second quarter, it had closing adjusted gross margins of 23.9%.
Shares of Taylor Morrison Home are up 55% in the last year. Yet it remains cheap, with a forward P/E of 8.7. The company does not pay a dividend, but Taylor Morrison Home does have a share repurchase plan.
Taylor Morrison is a Zacks Rank #2 (Buy) stock.
Should Taylor Morrison Home be on your homebuilder short list?
What Else Should You Know About the Cheap Homebuilder Stocks?
Tune into this week’s podcast to find out.
[In full disclosure, Zacks Value Investor portfolio owns shares of PHM.]
In-Depth Zacks Research for the Tickers Above
Normally $25 each - click below to receive one report FREE:
Welcome to Episode #383 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
The Federal Reserve has finally started cutting interest rates. It announced a 50-basis point cut in Sep 2024.
Fed rate cuts usually impact mortgage rates, although mortgage rates had already been falling heading into the latest FOMC meeting. 30-year fixed mortgage rates have fallen about a point to 6.14% from 7.24%.
This means more buyers can afford a home. As long as the employment market remains stable, home sales should rise in 2025.
Homebuilders Stocks Soar but are Still Cheap
The homebuilder stocks have soared in 2024 as demand remained strong for new homes and in anticipation of mortgage rates falling and home sales rising.
Most of the homebuilders trade with forward price-to-earnings (P/E) ratios under 12. This is extremely cheap as the S&P 500 is trading at 19.9.
Is there still more gas left in the tank with these stocks?
Screening for Top Homebuilder Stocks
The homebuilders have their own industry so you can set up a screen that looks for stocks in that industry with a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Those are the top two Zacks recommendations.
There are 16 stocks in the homebuilder industry on Zacks. At the time of the podcast recording, only one was a Zacks Rank #1 (Strong Buy) and 4 are #2 (Buy) stocks.
All 5 of them are also cheap, even without screening for price-to-earnings (P/E) or some other valuation metric.
5 Cheap Homebuilder Stocks to Buy Now
1. Century Communities, Inc. (CCS - Free Report)
Century Communities is one of the nation’s largest homebuilders with a market cap of $3.3 billion. It recently became a top 5 builder in Houston but serves many markets. In the second quarter of 2024, net new contracts were up 20% year-over-year and that was before the Fed cut rates.
Shares of Century Communities have soared 53% over the last year but it’s still cheap with a forward P/E of just 9.8.
Century Communities is a Zacks Rank #1 (Strong Buy) stock.
Should Century Communities be on your homebuilder short list?
2. M/I Homes, Inc. (MHO - Free Report)
M/I Homes is a national homebuilder with a market cap of $4.6 billion. In the second quarter of 2024, gross margins rose to 28% from 25% in the prior year’s quarter.
Shares of M/I Homes have jumped 87% in the last year. It is still dirt cheap however. M/I Homes trades with a forward P/E of just 8.4.
At the time of the recording of the podcast. M/I Homes was a Zacks #2 (Buy) stock but is now a #1 (Strong Buy) stock.
Should M/I Homes be on your homebuilder short list?
3. Meritage Homes Corp. (MTH - Free Report)
Meritage Homes is the 5th largest homebuilder in the United States. It has a market cap of $7.4 billion.
Shares of Meritage Homes have gained 56% in the last year. But it, too, remains dirt cheap with a forward P/E of just 9.7. Meritage Homes also pays a dividend, yielding 1.5%.
Meritage Homes is a Zacks Rank #2 (Buy) stock.
Should Meritage Homes be on your homebuilder short list?
4. PulteGroup, Inc. (PHM - Free Report)
PulteGroup is the largest publicly traded homebuilder in the United States with a market cap of $29.2 billion. It builds under the Centex, Pulte and Del Webb brands, among others. Last quarter, it had an incredible gross margin of 29.9%.
Shares of PulteGroup have soared 84% in the last year, hitting new highs. Yet it remains attractively priced with a forward P/E of 10.5. Pulte pays a dividend, yielding 0.6%. It also has a share repurchase program.
Pulte is a Zacks Rank #2 (Buy) stock.
Should the large homebuilders like Pulte be on your short list?
5. Taylor Morrison Home Corp. (TMHC - Free Report)
Taylor Morrison Home is a large homebuilder with a market cap of $7.3 billion. In the second quarter, it had closing adjusted gross margins of 23.9%.
Shares of Taylor Morrison Home are up 55% in the last year. Yet it remains cheap, with a forward P/E of 8.7. The company does not pay a dividend, but Taylor Morrison Home does have a share repurchase plan.
Taylor Morrison is a Zacks Rank #2 (Buy) stock.
Should Taylor Morrison Home be on your homebuilder short list?
What Else Should You Know About the Cheap Homebuilder Stocks?
Tune into this week’s podcast to find out.
[In full disclosure, Zacks Value Investor portfolio owns shares of PHM.]