The stock market has been very rough lately but there is definitely a bright spot in the homebuilding industry with companies like M/I Homes ( (MHO – Snapshot Report) leading the way. Companies like MHO in this sector have seen amazing data as of late and there is plenty of reason to believe that they will soar once this rough patch is over.
Pretty much any housing data point as of late has been extremely strong (or at least lukewarm) with figures like existing home sales and housing starts beating expectations, while home prices and confidence remain on the right track as well. Plus, when you add in a relatively strong jobs picture and declining rates, it is easy to see why housing demand is extremely strong right now.
For these reasons it shouldn’t be surprising to note that the industry is in the top 30% from a Zacks Industry Rank perspective. But why look at MHO in particular? Well, the company, as a builder of single family homes in the Midwest and South/Mid-Atlantic, stands to take advantage of these trends in a big way and analysts are definitely on board with their potential if you look to their recent revisions to estimate projections.
MHO Earnings Estimates
Investors haven’t seen a single estimate go lower for MHO earnings in the past two months and we have seen modest increases to the consensus estimate too. In fact, the current year has gone from $1.81/share to $2.03/share in EPS in the past 30 days, while the next year figures have jumped from $2.50/share to $2.75 in the same time frame.
This increase is posting the growth rate expectations for MHO as now the company is projected to see EPS growth of 51% for the current year, and a still robust 35% for the following year. These are pretty incredible growth rates for a company trading at a forward PE below 15, which should further underscore why MHO is a great pick right now.
In fact, we currently have MHO as a Zacks Rank #1 (Strong Buy) stock so we are looking for more outperformance from this company in the near future. And with the stock on a nice run over the past few months, this could definitely be a great pick ahead of the earnings in October for this often overlooked homebuilder.
It isn’t much of a secret that the homebuilding space is hot right now. Data has been strong while the overall economic picture of a better jobs market and low rates is helping too, making this space a very strong play overall.
However, while a broad play is certainly an option in this environment, MHO does stand out as a great choice on its own. Not only is it expected to see double digit earnings growth this year, but its PE remains extremely low compared to both the industry and the overall market. So if you are looking for a top choice in the homebuilder segment, definitely give this soaring stock a closer inspection.
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