The homebuilders were hot in 2012 and it looks to continue in 2013 as the housing market recovers. NVR, Inc. (NVR) is one that you don’t hear about as much as the big housing names like Pulte and Lennar. But this Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits in both 2013 and 2014.
NVR might not be familiar but its homebuilding segments probably are. It is a holding company that operates Ryan Homes, NVHomes, Fox Ridge Homes and Heartland Homes in 15 states. It also operates NVR Mortgage out of Virginia.
It’s best known for Ryan Homes, which was founded in 1948 in the post-World War II boom and has built 365,000 single family homes, townhouses and condos across the country.
Fourth Quarter Told The Story
On Jan 24, NVR reported fourth quarter results and confirmed just how good the housing recovery really is. These are the kind of numbers you want to see out of the homebuilders right now. This recovery is no fluke.
Fourth quarter revenue jumped 27% to $943 million. New orders rose 22% to 2,625 units. The backlog also climbed by 35% to 4979 units.
The Earnings Turnaround
Not surprisingly, it was dark days following the Great Recession of 2008 and 2009. In 2010, the company managed to grow earnings by 7.7% but then they fell 30% in 2011.
2012 marked the start of a the earnings turnaround, however. Earnings grew 51% in 2012 and are expected to grow another 51% in 2013 and 39% in 2014.
Share Price Over $1000
No, you’re not reading that wrong. NVR trades with a share price over $1000. But don’t let that stop you from considering the stock. Google trades above $800 and Priceline is right around $700. Share price isn’t indicative of value (or lack thereof.)
There’s no doubt some of the homebuilders have ridden too far, too fast. Check out NVR’s 2 year chart.
The industry has a collective P/E of 139. That’s not exactly cheap.
But NVR has attractive valuations, comparatively. It has a forward P/E of just 19.9 and a price-to-book ratio of 3.5.
NVR is the Only #1
There is a lot of good news in the housing market right now. The industry is ranked 21 out of 265 by Zacks.
NVR, however, is the only company out of 16 in the Residential/Commercial Building industry with a Zacks Rank #1 (Strong Buy).
It is scheduled to report first quarter results on Apr 18. It has surprised 3 out of the last 4 quarters so it’s earnings surprise track record has been improving as well.
If you’re looking for a leader in housing, NVR is it.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.
NVR INC (NVR): Free Stock Analysis Report
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