M/I Homes: A Great Home For Your Cash

seekingalpha08-24

M/I Homes stock has outperformed the S&P 500 significantly since 2022 due to how cheap shares have been.Despite revenue and profit declines in 2023, the company saw improvements in backlog and ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2461638982?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1601567522/image_1601567522.jpg","is_english":true,"pubTime":"2024-08-24 18:03","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2461638982","market":"us","top_or_hot":-1,"title":"M/I Homes: A Great Home For Your Cash","media":"seekingalpha","content":"<div>\n<p>M/I Homes stock has outperformed the S&P 500 significantly since 2022 due to how cheap shares have been.Despite revenue and profit declines in 2023, the company saw improvements in backlog and ...</p>\n\n<a href=\"https://seekingalpha.com/article/4716876-mi-homes-a-great-home-for-your-cash\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>M/I Homes: A Great Home For Your Cash</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nM/I Homes: A Great Home For Your Cash\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-24 18:03 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4716876-mi-homes-a-great-home-for-your-cash><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>M/I Homes stock has outperformed the S&P 500 significantly since 2022 due to how cheap shares have been.Despite revenue and profit declines in 2023, the company saw improvements in backlog and ...</p>\n\n<a href=\"https://seekingalpha.com/article/4716876-mi-homes-a-great-home-for-your-cash\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GRBK","symbol_name":"Green Brick Partners","start_time":0,"source_url":"https://seekingalpha.com/article/4716876-mi-homes-a-great-home-for-your-cash","article_id":"2461638982","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1601567522/image_1601567522.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2461638982","pubTimestamp":1724493803,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"M/I Homes stock has outperformed the S&P 500 significantly since 2022 due to how cheap shares have been.Despite revenue and profit declines in 2023, the company saw improvements in backlog and profitability in 2024.Shares are considered cheap and offer potential upside, and management is actively buying back a lot of stock.   The Good Brigade One of my best calls over the last couple of years has been a home builder by the name of M/I Homes . In my last article about the company, published in early January 2023, I acknowledged that the company had been doing quite well for itself. I did say that the firm might see some short-term pain. But ultimately, I concluded that the long-term picture for the business was positive. This led me to keep the firm rated a ‘buy’ to reflect my view that shares would outperform the broader market for the foreseeable future. And outperform they did!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"GRBK":"Green Brick Partners","BK4585":"ETF&股票定投概念","CCS":"Century Communities","BK4588":"碎股","TPH":"Tri Pointe Homes Inc.","LU0054578231.USD":"BGF SYSTEMATIC SUSTAINABLE GLOBAL SMALLCAP \"A2\" (USD) ACC","BK4088":"住宅建筑","BZH":"贝哲房屋","CFA.SI":"NikkoAM-STC Asia REIT","DFH":"Dream Finders Homes, Inc.","MHO":"MI 家居"},"translate_title":"M/I Homes：物有所值的好家","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BZH":1,"CCS":1,"CFA.SI":1,"DFH":1,"GRBK":1,"MHO":1,"TPH":1},"content_text":"M/I Homes stock has outperformed the S&P 500 significantly since 2022 due to how cheap shares have been.Despite revenue and profit declines in 2023, the company saw improvements in backlog and profitability in 2024.Shares are considered cheap and offer potential upside, and management is actively buying back a lot of stock.   The Good Brigade One of my best calls over the last couple of years has been a home builder by the name of M/I Homes (MHO). In my last article about the company, published in early January 2023, I acknowledged that the company had been doing quite well for itself. I did say that the firm might see some short-term pain. But ultimately, I concluded that the long-term picture for the business was positive. This led me to keep the firm rated a ‘buy’ to reflect my view that shares would outperform the broader market for the foreseeable future. And outperform they did! Since the publication of that article, the stock is up 235.4%. That dwarfs the 46.3% upside seen by the S&P 500 over the same window of time. But when we look at when I initially rated it a ‘buy’ back in August 2022, the picture is even better. Shares are up 258.6% while the S&P 500 is up only 34.4%. After seeing such massive upside, you might think that I would be ready to downgrade the stock. But because of how shares are currently priced, both on an absolute basis and relative to similar enterprises, I would argue that additional upside is on the table. A great home for your money   Author - SEC EDGAR Data Because of how much time has passed, it might be best to start off with how the business has performed over the past couple of years. Back in 2022, revenue for the company came in at $4.13 billion. In 2023, sales were lower at $4.03 billion. That's a decline year over year of 2.4%. Even though the company benefited from a rise in the average price of a home delivered from $479,000 to $483,000, it suffered from a drop in deliveries from 8,366 homes to 8,112. This is not all that surprising. After all, the housing market did go through a bit of weakness because of inflationary pressures and the high interest rate environment that ensued that was aimed at combatting that inflation. Since a home is usually the largest investment that an individual or family will make during their lifetime, and because of the long-term financing often involved in it, higher prices and high interest rates make the purchase of a home far more costly.   Author - SEC EDGAR Data With revenue falling, profits and cash flows largely followed suit. Net income declined from $490.7 million to $465.4 million. It is true that operating cash flow surged from $184.1 million to $552.1 million. But if we adjust for changes in working capital, we get a more modest increase from $551.8 million to $566.5 million. In addition to this, there is EBITDA. And just like net income, it took a hit, falling from $705.4 million to $648.2 million.   Author - SEC EDGAR Data It is worth noting that the company did benefit from a surge in new contracts. Customers ordered 7,977 homes in 2023. That is up materially from the 6,668 ordered one year earlier. Unfortunately, this was not enough to stop the company's backlog from falling from 3,137 homes to 3,002. While the cancellation rate did fall from 14.3% to 11.4%, that is still higher than it should be. In addition to this, backlog is less valuable on a per-home basis than it was then. In 2022, the average price of a home in backlog was $541,000. That number by the end of last year had fallen to $525,000.   Author - SEC EDGAR Data Moving into the 2024 fiscal year, we have seen a bit of a bright spot. Revenue in the first half of the year was $2.16 billion. That's an improvement over the $2.01 billion reported the same time in 2023. The company benefited from a rise in homes delivered from 3,997 to 4,382. But this was offset to some extent by a decline in the average price of a delivery from $489,000 to $477,000. While this may not seem like all that much, when applied to the number of homes delivered for that time, that's an extra $52.6 million in revenue off the firm's top line. And since the company is already earnings positive, every penny of that would have been a one penny increase in pretax income.   Author - SEC EDGAR Data Even though the average price of a home delivered declined, the rise in deliveries was enough to push net income up to the tune of 28.8% from $221.1 million to $284.8 million. Other profitability metrics ended up being mixed. As an example, operating cash flow plunged from $417.7 million to only $143.3 million. But if we adjust for changes in working capital, we get a more modest decline from $279.9 million to $242.8 million. On the other hand, the company did see an improvement in EBITDA, with that metric rising from $310.5 million to $386.6 million. From the end of last year to the end of the second quarter, M/I Homes experienced an improvement in backlog. By the end of the quarter, backlog totaled 3,422 homes. However, that is still down from the 3,508 homes that the company had at the end of the second quarter of 2023. As disappointing as this is to see, it is offset by a year-over-year rise in the average price of a home in backlog. This jumped from $507,000 last year to $533,000 this year. The backlog picture would have been worse had it not been for the fact that its cancellation rate improved from 12% to 9%. To be honest with you, I'm not surprised to see the growth in backlog on a sequential basis. This is because, for the first half of this year, management locked in contracts for 4,802 new homes. That's 9.9% greater than the 4,368 homes locked in the same time last year.   Author - SEC EDGAR Data Unfortunately, we don't really know what to expect for the rest of this year from a revenue and profit perspective. But if we annualize results seen so far, we would anticipate in an income of $599.5 million, adjusted operating cash flow of $491.4 million, and EBITDA of $807.1 million. Taking these estimates, as well as historical results from 2023, I was able to value the company as shown in the chart above. Even though the stock is more expensive on a forward basis when it comes to the price to adjusted operating cash flow multiple, it's cheaper using the other two metrics. And in fact, it is so cheap that it looks quite appetizing. And it's not just cheap on an absolute basis. It's cheap relative to similar enterprises as well. In the table below, you can see precisely what I mean. On a price to earnings basis, only one of the five companies I compared M/I Homes to ended up being cheaper than it is. And when it came to the other two approaches, our candidate ended up being the cheapest of the group.   Company Price / Earnings Price / Operating Cash Flow EV / EBITDA   M/I Homes 7.5 9.1 5.6   Green Brick Partners (GRBK) 10.9 570.2 8.5   Dream Finders Homes (DFH) 10.9 16.5 9.1   Century Communities (CCS) 10.3 74.7 9.4   Tri Pointe Homes (TPH) 10.4 26.9 8.2   Beazer Homes USA (BZH) 7.0 25.8 12.3   Click to enlarge One other thing I did in analyzing the company was to see what kind of upside, if any, shares might offer. In the chart below, you can see a few different scenarios. For each of the price to earnings approach, the price to operating cash flow approach, and the EV to EBITDA approach, I wanted to see how much upside, or downside, shares would experience if they were to trade at the multiple of the cheapest of the five companies I compared it to. We get downside, in the worst case, of 6.7%. But the other two metrics give us upside of between 46.3% and 81.3%. I then did the same thing using the average of these companies. In this case, for the price to operating cash flow approach, I excluded the two most expensive firms. This is because they are very obvious outliers. Even so, we get upside of between 32% and 153.5%.   Author - SEC EDGAR Data Management is well aware of how cheap shares are. On May 13th, of this year, they announced a new $250 million share repurchase program that replaced the prior authorization that had only $103 million in capacity left on it. After making $50.3 million worth of purchases in the second quarter alone, the company has $207.1 million in capacity left under this program. Year-to-date, management bought back $75.6 million worth of stock. This is on top of the $65.3 million repurchased last year. It helps that net debt as of the end of the latest quarter was only $79.7 million. Takeaway  Fundamentally speaking, things are a bit mixed for M/I Homes right now. But on the whole, I would consider the picture to be positive. Just like other players in this space, M/I Homes we'll see some volatility from time to time. If the US economy experiences a hard landing, for instance, there could be months or even a year of subpar performance. But for those focused on the long haul, shares look cheap enough to warrant a bullish outlook. At the end of the day, this thinking led me to keep the company rated a ‘buy’ for now.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.27.0","shortVersion":"4.27.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2461638982"}