SPECIAL REPORT The Top 7 Stocks for 2024

The 3 Most Undervalued Homebuilder Stocks to Buy Now: August 2023


  • These three undervalued homebuilder stocks offer compelling opportunities worth taking advantage of.
  • PulteGroup (PHM): PHM’s dedication shines through impressive financial growth.
  • KB Homes (KBH): KB Homes is transforming landscapes into thriving communities.
  • LGI Homes (LGIH): LGI Homes’ demonstrates effective cost management and profitable operations.
Homebuilder Stocks - The 3 Most Undervalued Homebuilder Stocks to Buy Now: August 2023

Source: ARMMY PICCA/ShutterStock.com

The concept of homeownership is as deeply ingrained in our society’s needs as shopping for groceries or going to the doctor. We all have a desire to buy or build our own home at some point in our life to live with our family. It is something that will always be a goal for each of us, and therefore is a stock option that will always have some bounce back to it. Let’s take a look at these three homebuilder stocks present incredible opportunities for this month of August.

PulteGroup (PHM)

the PulteGroup logo seen displayed on a smartphone
Source: rafapress / Shutterstock.com

Imagine walking into a home that has never been lived in, where every corner holds the promise of new beginnings. PulteGroup (NYSE:PHM), one of America’s leading homebuilders, specializes in bringing these brand new homes to life. If you’re looking for a newly built home, this company may be the answer.

Investors take note, PulteGroup shines for several reasons. Its financial results alone boast an impressive 8% increase in home sales revenue to a staggering $4.1 billion. In addition, more homes have found new owners, with a 5% increase in closed sales. Even better, the median sales price increased 3%, indicating steady demand and an ability to sell at favorable prices.

But numbers are not the only thing that defines PulteGroup. They wear their heart on their sleeve through their Built to Honor program, which gives away mortgage-free homes to wounded veterans. This demonstrates not only their good business sense, but also their strong ethical and social values.

Expanding their horizons, they have recently set foot in South Carolina, establishing vibrant communities in Greenville and Columbia under the Pulte Homes banner. Take Indigo Park in Easley, for example, where a variety of home designs, starting at $334,990, are attracting new residents. Indeed, I think PulteGroup is a top option in homebuilder stocks. While it has a low valuation now, its long-term projection seems highly promising.

KB Homes (KBH)

KB Home logo at headquarters building. KBH stock.
Source: Sundry Photography / Shutterstock

Visualize KB Homes (NYSE:KBH) as a master craftsman, skillfully painting the landscapes of communities across the country. Their expertise lies in transforming plots of land into thriving neighborhoods, a testament to their building prowess.

Their latest venture has brought them together with the National Forest Foundation, a nonprofit organization dedicated to safeguarding national forests. Together they promote sustainability by replanting forests and ensuring the longevity of these ecosystems for generations.

They are more than builders, they are stewards of the environment. Their commitment to eco-efficient homes has earned them recognition from the Environmental Protection Agency (EPA). The awards celebrate their leadership in creating ENERGY STAR certified homes in several markets.

But let’s get to the numbers, reported revenues of $1.77 billion, accompanied by earnings per share of $1.94. The sale of 3,936 homes during the period under review further illustrates its success. Beyond that, KB Home flexes its financial muscle by repurchasing 2.2 million shares worth $92 million, while raising its book value per share to $46.72. While the company still has some growing to do, it’s clearly one of the best undervalued homebuilder stocks to buy right now.

LGI Homes (LGIH)

Located in the Mojave Desert City of Victorville, California, a feather flag sign for LGI Homes with text of New Homes - 0% Down. (LGIH)
Source: Felipe Sanchez / Shutterstock.com

At the heart of the homebuilding world is LGI Homes (NASDAQ:LGIH), dedicated to the art of creating new residences. They are the visionaries behind the scenes, designing and building homes where families create memories.

Investors with an eye on the real estate market will find promise in them. In the second quarter of 2023 they earned net income of $53.1 million, which translates to $2.26 per share for holders of basic shares and $2.25 per share for holders of diluted shares. Notably, they also earned pre-tax income of $71.4 million.

In terms of operations, income from home sales amounted to$645.3 million, resulting in the sale of 1,854 homes during the period. With an average sales price per home of $348,042, the market values its supply.

And let’s talk about profitability, a solid 22% gross margin relative to home sales revenue. When adjustments are taken into account, the adjusted gross margin rises to 23.8%, demonstrating its skillful cost management and efficient profitability.

As of this writing, Gabriel Osorio-Mazzilli did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/08/the-3-most-undervalued-homebuilder-stocks-to-buy-now-august-2023/.

©2024 InvestorPlace Media, LLC