D.R. Horton (DHI): Taking a Fresh Look at Valuation After Recent Share Price Momentum

D.R. Horton (DHI) shares inched higher in the latest session, extending a mixed stretch where gains this month contrast with weaker performance over the past 3 months and prompting a closer look at what the market is pricing in.

See our latest analysis for D.R. Horton.

With the share price now around $155, D.R. Horton’s 1 month share price return of 7.4 percent and modest 1 year total shareholder return of 2.2 percent suggest momentum is rebuilding after a choppy few months.

If this move has you thinking about what else could surprise to the upside, it is a good time to explore auto manufacturers as another corner of the consumer cycle story.

Given steady earnings growth but only modest recent returns, investors face a key question: is D.R. Horton’s current valuation still leaving upside on the table, or is the market already pricing in its next leg of growth?

Most Popular Narrative: 5.7% Undervalued

With D.R. Horton last closing at $155.27 against a narrative fair value of about $164.69, the story leans toward modest upside that hinges on specific growth and margin assumptions.

The company's continued strategic expansion of entry-level and affordable home offerings enables it to address affordability concerns, tap into a wider buyer pool, and maintain high absorption rates, mitigating cyclical margin compression and sustaining revenue even in softer market conditions.

Read the complete narrative.

Want to see how steady revenue growth, resilient margins, and shrinking share count combine into that upside case? The earnings path behind this fair value may surprise you.

Result: Fair Value of $164.69 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent affordability pressures and heavier use of incentives could crimp margins and test whether entry-level demand can fully absorb rising land and construction costs.

Find out about the key risks to this D.R. Horton narrative.

Another View: What Our DCF Says

While the narrative fair value suggests D.R. Horton is about 5.7 percent undervalued, our DCF model is more cautious and puts fair value closer to $116.40, below today’s $155.27 price. If future cash flows disappoint even modestly, could downside risk be larger than the story implies?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out D.R. Horton for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 904 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own D.R. Horton Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom view in minutes with Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding D.R. Horton.

Looking for more investment ideas?

Before you move on, consider putting the rest of your capital to work with targeted ideas from the Simply Wall Street Screener so potential winners do not slip past you.

• Capitalize on mispriced opportunities by using these 904 undervalued stocks based on cash flows that may have strong cash flows the market has not fully appreciated yet.
• Explore the next wave of innovation by backing these 26 AI penny stocks positioned at the forefront of real world artificial intelligence adoption.
• Strengthen your income stream by focusing on these 12 dividend stocks with yields > 3% that can potentially support long term, reliable payouts.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com