I’m looking for input on valuing home builders and what to consider. From what I can tell, builders are sitting at fair value now. But the future 5 or so years of home demand is what matters. Heres a list of things I think are important. If you know the industry and any specific ones like DHI, MHO, let me know what else I should be considering.
-lumber supply and prices
-location of home being built (south like texas area is booming while north not really)
-the company focus. Starter tract homes in higher demand than luxury
-usage of land options vs pre purchasing gives less debt liability makes the company more lean and flexible
-valuing based on fcf is pointless (unless you seperate maint cap) because most of capex is building new homes and inventory, using earnings growth and book value/equity is better
-its a cyclical business, currently the housing market has short supply and high demand
-interest rates hikes cut down mortgage approvals which is a downward pressure, though may be compensated by such short supply
-labour shortage currently is a downward pressure
What else might be a consideration to factor in currently or future looking?
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