Overvalued Home Builders Face Earnings Hurdle
Reading the Table
OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage. Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months. Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: Price at which to enter a GTC limit order to sell on strength. Among the eight home builders profiled today four are rated buy and four are rated hold, as one was downgraded to hold from buy since Dec. 19. All eight stocks are overvalued with seven overvalued by double-digit percentages between 18.1% and 56.3%. All eight have had significant double-digit gains over the last 12 months between 53.1% and 155.3%. The maximum projected gain over the next 12 months is only 8.7%. The six with 12-month trailing price-to-earnings ratios have extremely elevated P/Es by historical standards for home builders between 26.1 and 48.1. D R Horton (DHI) ($21.00 vs. $20.08 on Dec. 19): Still has a buy rating with its Sept. 21 high at $22.79. The daily chart is overbought with the weekly chart positive with the stock above its five-week modified moving average at $20.21. My quarterly value level is $18.86 with a semiannual pivot at $20.50 and monthly risky level at $21.92. Hovnanian (HOV) ($6.00 vs. $6.05 on Dec. 19): Had a double downgrade to strong sell before my Dec. 19 post and then the stock fell from a multi-year high at $7.43 on Jan. 2 to $6.00 with the stock now hold rated. The daily chart is negative and the weekly chart shifts to negative on a close this week below the five-week MMA at $5.96. My quarterly value level lags at $2.89 with a semiannual pivot at $6.00 and monthly risky level at $6.22. KB Home (KBH) ($16.15 vs. $17.00 on Dec. 19): Still has a hold rating and a multi-year high of $17.30 set on Oct. 19. KBH reported its quarterly results back on Dec. 20 and missed EPS estimates by three cents with an EPS of three cents. The daily chart profile shows declining momentum and the weekly chart is positive with the five-week MMA at $15.61. My semiannual value level lags at $10.77 with my monthly risky level at $16.57. Lennar (LEN) ($40.52 vs. $39.71 on Dec. 19): Still has a buy rating after setting a multi-year high at $42.00 on Jan. 9. The daily chart has a negative divergence in momentum despite reporting a better than expected EPS at 56 cents on Jan. 15. The weekly chart is positive with the five-week MMA at $38.97. My semiannual value level is $36.03 with a monthly pivot at $40.58 and weekly risky level at $41.41.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV