NEW YORK (TheStreet) -- Tri Pointe Homes (TPH) was gaining 2.3% to $15.81 Thursday after Weyerhaeuser (WY) announced the preliminary results of its exchange offer related to the split-off of its homebuilding business Weyerhaeuser Real Estate.
As part the "Reverse Morris Trust" transaction connected to the exchange offer, Weyerhaeuser Real Estate will merge with a subsidiary of Tri Pointe. The split-off company will then become a wholly-owned subsidiary of Tri Pointe. The merger is expected to close on July 7.
More than 4.3 million shares of Tri Pointe were traded by 11:20 a.m. in anticipation of the merger, more than the daily average trading volume of about 1.3 million shares.
Must read: Warren Buffett's 25 Favorite Stocks
TheStreet Ratings team rates TRI POINTE HOMES INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TRI POINTE HOMES INC (TPH) 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TPH's very impressive revenue growth greatly exceeded the industry average of 17.4%. Since the same quarter one year prior, revenues leaped by 161.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels.
- Net operating cash flow has increased to -$41.63 million or 12.20% when compared to the same quarter last year. Despite an increase in cash flow of 12.20%, TRI POINTE HOMES INC is still growing at a significantly lower rate than the industry average of 251.66%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The gross profit margin for TRI POINTE HOMES INC is rather low; currently it is at 22.59%. Regardless of TPH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TPH's net profit margin of 5.90% compares favorably to the industry average.
- You can view the full analysis from the report here: TPH Ratings Report