Tri Pointe Homes Inc (TPH, Financial) experienced a 7.91% dip in its daily stock, with a 3-month loss of 6.15%. Despite this, the company boasts an Earnings Per Share (EPS) (EPS) of 4.76. This raises the question: Is the stock fairly valued? Join us as we delve into an in-depth valuation analysis of Tri Pointe Homes.
Introduction to Tri Pointe Homes Inc (TPH, Financial)
Tri Pointe Homes is an American construction company specializing in residential construction. With a portfolio of six regional housing brands, the company designs and builds single-family homes and condominiums. Its largest regional brands include Maracay Homes operating in Arizona and TRI Pointe and Pardee Homes operating in California, Nevada, and Colorado. The company generates most of its revenue from California, followed by Arizona and Nevada. Annually, Tri Pointe Homes completes approximately 4,000 homes, with an average selling price around $500,000.
Understanding the GF Value of Tri Pointe Homes (TPH, Financial)
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past performance and growth, and future estimates of business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
With a current price of $28.99 per share and a market cap of $2.90 billion, Tri Pointe Homes shows every sign of being fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Tri Pointe Homes
Companies with poor financial strength pose a high risk of permanent capital loss for investors. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Tri Pointe Homes has a cash-to-debt ratio of 0.67, which ranks better than 50% of 106 companies in the Homebuilding & Construction industry. The overall financial strength of Tri Pointe Homes is 6 out of 10, indicating fair financial health.
Profitability and Growth of Tri Pointe Homes
Consistent profitability over the long term offers less risk for investors. Tri Pointe Homes has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $4.20 billion and an Earnings Per Share (EPS) of $4.76. Its operating margin is 15.1%, which ranks better than 71.56% of 109 companies in the Homebuilding & Construction industry. Overall, the profitability of Tri Pointe Homes is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in the valuation of a company. The 3-year average annual revenue growth of Tri Pointe Homes is 24.2%, which ranks better than 87.25% of 102 companies in the Homebuilding & Construction industry. The 3-year average EBITDA growth rate is 56.5%, which ranks better than 88.42% of 95 companies in the Homebuilding & Construction industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Tri Pointe Homes's ROIC was 12.56, while its WACC came in at 7.69.
Conclusion
In conclusion, the stock of Tri Pointe Homes (TPH, Financial) shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 88.42% of companies in the Homebuilding & Construction industry. To learn more about Tri Pointe Homes stock, you can check out its 30-Year Financials here.
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