PulteGroup, Inc. (NYSE:PHM) — This home builder is the third-largest public U.S. home builder by market capitalization ($6.9 billion).
Based on a number of growth factors, Standard & Poor’s estimates that in 2016, PHM will generate a 24% increase in revenues on a 15% increase in units sold and an average price increase of 7% per unit. The backlog on June 30 was 9,679, up 7.6% from a year previous.
They forecast revenue growth of 13% in 2017 on a 10% increase in homes delivered at an average price increase of 4%. Thus they forecast EPS of $1.53 in 2016 and $2.12 in 2017, and have rated the stock its highest rating, “five-star strong buy.”
Their fundamental research target for the stock is $25 based on a 13.6X forward-four-quarters EPS estimate of $1.84. Q2 ‘16 EPS of 34 cents beat the Capital IQ consensus estimate by 2 cents. PHM announced a $1.5 billion share buyback plan, which would reduce the number of shares outstanding by 20% at the end of 2017.
The huge “V” formation broke to a bull market in July at about $20. The bullish “V” was formed over a 12- month period and is one of the strongest charts in the building sector, supported by significant accumulation, a MACD buy signal in late September and a recent CBR buy signal from my internal indicator.
Both traders and long-term investors should consider this stock at under $20. Traders could reach the target of $25 within four months and investors may do much better, especially if the building industry maintains its current growth trends.
