BLDR

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

KB Home’s Outlook for 2025 Better Than Expected

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Image: KB Home’s shares have done well since the beginning of 2023. By Brian Nelson, CFA KB Home (KBH) reported fourth quarter results on January 13 that beat expectations on both the top and bottom lines. Year-over-year, revenues were up 19%, to $2 billion, above consensus of $1.98 billion, while homes delivered increased 17% and average selling price advanced 3%, to $501,000. Homebuilding operating income increased 27% in the quarter thanks in part to a 60 basis-point improvement in its homebuilding operating income margin. KB Home’s housing gross profit margin increased to 20.9% from 20.7% in the same period last year. Financial services pretax income grew 8% in the quarter. Net income rose 27%, while diluted earnings per share increased … Read more

Toll Brothers Ends Strongest Year Ever

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By Brian Nelson, CFA On December 9, luxury homebuilder Toll Brothers (TOL) reported better-than-expected fourth-quarter fiscal 2024 results with revenue and non-GAAP earnings per share coming in higher than the consensus forecasts. Home sales revenues increased 10% in the quarter, while delivered homes were 3,431, up 25%. Net signed contract value was up 32% compared to the same quarter a year ago, with contracted homes of 2,658, up 30%. Backlog value, however, fell 7% on a year-over-year basis, with homes in backlog of 5,996, down 9%. Toll Brothers’ adjusted home sales growth margin, which excludes interest and inventory write-downs, came in at 27.9% in the quarter, below the adjusted home sales gross margin of 29.1% in the fiscal fourth quarter … Read more

Toll Brothers Expects Demand to Remain Solid Into 2025

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Image: Toll Brothers stock has done quite well during the past couple years. By Brian Nelson, CFA Luxury homebuilder Toll Brothers (TOL) recently reported fiscal third quarter results with revenue and non-GAAP earnings per share coming in better than expectations. Home sales revenues advanced 2% from the same period a year ago, while pre-tax income came in at $503.6 million, down from $553 million in last year’s quarter. Fiscal third quarter earnings per diluted share was $3.60 compared with $3.73 in the same period a year ago, but it exceeded the consensus forecast of $3.31 per share. Net signed contract value was $2.41 billion in the quarter, up 11% from last year’s period, while contracted homes were also up 11% … Read more

Lennar Navigating Fluctuating Interest Rate Environment Well

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Image: Lennar has been a strong performer since the beginning of 2023. By Brian Nelson, CFA On June 17, homebuilder Lennar (LEN) reported better than expected second quarter results for fiscal 2024. Total revenues increased 9%, while diluted earnings per share leapt to $3.45 in the quarter from $3.01 in the same period a year ago. New orders jumped 19%, to 21,293 homes, while the firm’s backlog stood at 17,873 homes with a dollar value of $8.2 billion. Deliveries in the quarter increased 15%, to 19,690 homes. Its average sales price, net of incentives, per home delivered came in at $426,000 in the second quarter, while its homebuilding gross margin was up 10 basis points from last year, to 22.6%. … Read more

Toll Brothers Notes Strong Start to Spring Selling Season

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By Brian Nelson, CFA Back on February 20, luxury homebuilder Toll Brothers (TOL) released first-quarter results for fiscal 2024. Both revenue and GAAP earnings per share came in better than expected. Home sales revenue increased 10% in the quarter from the year-ago period, while delivered homes advanced 6%. Impressively, net signed contract value was up 42% from last year’s quarter, while the number of contracted homes increased 40%. Its backlog fell 18%, to $7.08 billion, however, but the company continues to benefit from higher home sales gross margins. Management’s commentary on the quarter was upbeat in the press release: We are very pleased with our strong first quarter results. We delivered 1,927 homes at an average price of approximately $1.0 … Read more

How Some Members Use Valuentum’s Investment Services

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By Brian Nelson, CFA Thank you for your membership to Valuentum. We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. We wanted to make sure that you know that, if you’re a dividend growth or income investor, that there are others that use our website to utilize the Valuentum process, fair value estimates and other metrics. Similarly, if you’re a practitioner of the Valuentum system, I wanted to make sure that you are … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Home Depot’s Comparable Store Sales Continue Declines, Big Ticket Purchases Slow

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By Brian Nelson, CFA Home Depot (HD) is one of the most resilient companies across the retail arena. The firm weathered the Great Financial Crisis [GFC] well and it handled the vicissitudes of the COVID-19 pandemic and aftermath flowingly as it juggled supply chain issues, changing consumer buying preferences, and increased demand as consumers remodeled and upgraded their working and living spaces while cocooning at home. The company’s second-quarter 2023 results, released August 15, came in better than expected, but comparable store sales fell 2% both in aggregate and in the U.S. Though comparable store sales declines improved from bigger declines in the first quarter, Home Depot’s guidance for comparable sales to fall 2%-5% for all of fiscal 2023 indicates … Read more