PulteGroup (PHM) Stock Gaining Today on Strong October Home Sales

NEW YORK (TheStreet) --PulteGroup (PHM) shares are up 1.4% to $21.24 in trading on Thursday as the U.S. home builder benefits from high October existing home sales numbers.

The National Association of Realtors (NAR) reported a 1.5% rise in existing homes sales to a seasonally adjusted rate of 5.26 million in October, the first month this year where the number was higher than the same period last year.

"Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth," said the NAR. 

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TheStreet Ratings team rates PULTEGROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PULTEGROUP INC (PHM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • PHM's revenue growth has slightly outpaced the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • PULTEGROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PULTEGROUP INC increased its bottom line by earning $6.74 versus $0.53 in the prior year. For the next year, the market is expecting a contraction of 84.0% in earnings ($1.08 versus $6.74).
  • The gross profit margin for PULTEGROUP INC is rather low; currently it is at 23.73%. Regardless of PHM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PHM's net profit margin of 8.81% compares favorably to the industry average.
  • You can view the full analysis from the report here: PHM Ratings Report
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