Market Overview

Five Homebuilders on the Rise

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Overall, throughout the past several months, news about the housing market has been mixed. Recently though, some new data has started to trend with more positive results, perhaps finally signaling a recovery.

The most recent data from Corelogic indicates that home prices rose 1.8 percent from April to May. Notably, Arizona and Michigan, where housing markets had been especially troubled, were among the states with the largest May home price advances. In Arizona prices rose 12 percent, and in Michigan they were up 7.9 percent.

Homebuilders have struggled since the U.S. housing bubble burst in 2007, but they may be set to ride the housing recovery if the markets have truly bottomed. The following homebuilders have already seen their share prices rise more than 40 percent in recent months.

Shares of DR Horton (NYSE: DHI) rallied more than 40 percent over the past six months and rose more than 20 percent in the past month alone. This S&P 500 component is headquartered in Fort Worth, Texas and has a market capitalization of more than $5.7 billion. In addition, DR Horton's forward earnings multiple is less than the company's price-to-earnings ratio (P/E). Also, the company has a long-term earnings per share (EPS) growth forecast of 10.0 percent and a dividend yield of about 0.8 percent. Over the past six months, the stock has outperformed peers, such as Toll Brothers (NYSE: TOL), and the broader markets.

Lennar (NYSE: LEN) shares rose more than 55 percent since six months ago and are up more than 23 percent in the past month. The Miami-based homebuilder is an S&P 500 component and has a market cap of more than $5.7 billion. Lennar's dividend yield is about 0.5 percent and the company's PE is less than the industry average. Moreover, Lennar's long-term EPS growth forecast is 32.8 percent. Despite these high EPS growth expectations, the company's short interest is still more than 20 percent of the float. Over the past six months, the stock has outperformed the S&P 500 and home-building competitors, such as KB Homes (NYSE: KBH).

After reaching a multiyear high Monday, shares of Meritage Homes (NYSE: MTH) traded more than 45 percent higher than they did six months ago. The Arizona-based company has a market cap of more than $1 billion. Analysts expect it to report a profit this year, compared to a loss last year. Revenues for the most recent quarter are expected to be more than 28 percent higher year over year. Short interest is about 10 percent of the float, less than any of the other homebuilders listed here. However, over the past six months, the stock has underperformed relative to PulteGroup and Lennar.

Michigan-based PulteGroup (NYSE: PHM) is trading near a 52-week high after rising more than 32 percent in the past month. This S&P 500 homebuilder has a market cap of more than $4 billion. The company's forward earnings multiple is less than the industry average PE. Meanwhile, PulteGroup's long-term EPS growth forecast is 10.0 percent, and analysts on average expect current quarter revenues to rise about 19 percent year-over-year. Over the past six months, the stock has outperformed Beazer Homes (NYSE: TOL) and the S&P 500.

The share price of Ryland Group (NYSE: RYL) surged around 62 percent since six months ago and reached a new 52-week high on June 29. The company is based in California and has a market cap of more than $1 billion. The firm has a dividend yield of around 0.5 percent and a forward earnings multiple is less than the industry average PE. Akin to PulteGroup and DR Horton, Ryland Group's long-term EPS growth forecast is 10.0 percent. Also, the company's short interest is more than 20 percent of the float. Ryland's share price is above 200-day and 50-day moving averages, and the stock has outperformed broader equity markets over the past six months.

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