DHI – Market expectations for Uniform ROA compression, but management is confident about pricing, demand, and liquidity

September 3, 2021

  • D.R. Horton, Inc. (DHI:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) earnings, with a 7.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, but management is confident about price improvements, housing starts demand, and their balance sheet position.
  • Specifically, management is confident they are seeing price improvements, the demand for housing starts is extraordinary, and their ample liquidity and low leverage positions them to operate effectively. In addition, they are confident they are focused on capital efficiency, that they are attempting to control the timing of house sales in order to meet customer build time expectations, and that their trade partners understand their expected start pace for Q4.