$NVR Inc(NVR)$ is a value investing opportunity among the US Homebuilders.
In a high inflation environment, companies have to worry not only about higher costs. They also have to contend with the economic impact of the various measures taken to control inflation.
So you need a history of product prices increasing at a higher rate than inflation. You also need a history of costs increasing at a lower rate than product prices. The company also has to be financially strong to outlast the lower economic growth period.
The US homebuilding sector has these features. Homebuilders that will do well are those with a strong management team and good business economics. This will be reflected by a track record of strong returns, shareholders' value creation, and strong financials.
NVR fits this profile. It if financially strong. It is also one of the better performing Homebuilders as can be seen from the peer comparison.
US Homebuilders Performance: Note; Gross Profitability = Gross Profit/Total Assets
NVR is trading as USD 4,234 per share (as of 13 May 2022) compared its intrinsic value of USD 5,454 per share. This intrinsic value was obtained based on a single-stage Free Cash Flow to the firm model with the following assumptions.
Table 1: Assumptions used
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