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TheStreet Open House

Why M/I Homes (MHO) Stock Is Gaining Today

NEW YORK (TheStreet) -- Shares of M/I Homes Inc. (MHO) are higher by 3.27% to $22.11 in mid-morning trading on Monday, as confidence among home builders reached its highest level in seven months.

The confidence gauge among home builders regarding present and future single family home sales rose two points to 55 in August. Readings over the 50 mark show an optimistic outlook regarding sales trends, Market Watch reported.

"Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand," said the National Association of Home Builders chief economist, Market Watch added.

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Other home builder stocks rising today include KB Home (KBH) , up 2.33% to $17.10, Lennar Corp. (LEN) , higher by 1.76% to $37.59, and M.D.C. Holdings Inc. (MDC) up 2.32% to $28.17.

Separately, TheStreet Ratings team rates M/I HOMES INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate M/I HOMES INC (MHO) 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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 20.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • M/I HOMES INC 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, M/I HOMES INC increased its bottom line by earning $5.06 versus $0.65 in the prior year. For the next year, the market is expecting a contraction of 68.2% in earnings ($1.61 versus $5.06).
  • The gross profit margin for M/I HOMES INC is rather low; currently it is at 21.61%. Regardless of MHO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MHO's net profit margin of 4.81% compares favorably to the industry average.
  • Net operating cash flow has significantly decreased to -$64.57 million or 91.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: MHO Ratings Report

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