M.D.C. Holdings Inc. Stock Upgraded (MDC)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- M.D.C. Holdings (NYSE: MDC) has been upgraded by TheStreet Ratings from hold to buy. 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, impressive record of earnings per share growth, solid stock price performance and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • MDC's very impressive revenue growth greatly exceeded the industry average of 25.9%. Since the same quarter one year prior, revenues leaped by 64.0%. 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 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • MDC HOLDINGS 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. We feel that this trend should continue. During the past fiscal year, MDC HOLDINGS INC turned its bottom line around by earning $1.26 versus -$2.11 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.26).
  • Powered by its strong earnings growth of 247.50% and other important driving factors, this stock has surged by 56.82% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Household Durables industry average, but is greater than that of the S&P 500. The net income increased by 257.6% when compared to the same quarter one year prior, rising from -$18.82 million to $29.67 million.
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M.D.C. Holdings, Inc., through its subsidiaries, engages in homebuilding and financial services businesses in the United States. The company has a P/E ratio of 30.2, above the S&P 500 P/E ratio of 17.7. M.D.C has a market cap of $1.88 billion and is part of the industrial goods sector and materials & construction industry. Shares are up 5% year to date as of the close of trading on Wednesday.

You can view the full M.D.C Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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