NEW YORK (TheStreet) -- Shares of William Lyon Homes (WLH - Get Report) are up 2.21% to $26.32 after it announced an agreement to acquire the residential home building business of privately held Polygon Northwest Co. for $520 million in cash.
The transaction marks William Lyon's entry into Washington and Oregon, and is expected to close in the third quarter of 2014.
Separately, TheStreet Ratings team rates WILLIAM LYON HOMES as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate WILLIAM LYON HOMES (WLH) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WLH's very impressive revenue growth greatly exceeded the industry average of 17.5%. Since the same quarter one year prior, revenues leaped by 85.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, WILLIAM LYON HOMES's return on equity significantly exceeds that of both the industry average and the S&P 500.
- WILLIAM LYON HOMES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, WILLIAM LYON HOMES increased its bottom line by earning $4.01 versus $2.35 in the prior year. For the next year, the market is expecting a contraction of 52.9% in earnings ($1.89 versus $4.01).
- Net operating cash flow has significantly decreased to -$169.74 million or 1522.71% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.42 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- You can view the full analysis from the report here: WLH Ratings Report