Homebuilder MDC Holdings Back To Building Profit


Generally, investors should focus on companies with a track record of profitability. Also, don't overlook turnarounds, which can go on to be big winners.

One such issue that has recently turned profitable isMDC Holdings ( MDC ), which builds homes under the Richmond American Homes label. The Denver-based company lost money from 2007 to 2011, but turned a profit of $1.28 a share last year.

MDC got off to a strong start in 2013. The company this month announced a first-quarter profit of 45 cents a share, up sharply from 4 cents a share in the year-ago period. Sales jumped 77% to $344.3 million -- the best in years. The gain also marked the fourth straight period of acceleration.

During the quarter, MDC delivered 1,018 new homes, up 64% from a year ago. Its backlog grew 30% to 1,927 homes.

Analysts polled by Thomson Reuters see its full-year earnings rising 73% to $2.22 a share. The estimate was recently revised higher.

MDC pays a dividend of $1 a share, which works out to a yield of 2.6%. But the company already paid out its 2013 dividend in December.

The firm has the highest yield among the domestic companies in the Building-Residential/Commercial group. Only China'sXinyuan Real Estate ( XIN ) offers a higher yield.

While MDC looks like it's still in a base, investors can also view the stock as double-bottom pattern. Sometimes there are different interpretations of price action.

The stock has yet to clear the standard middle-peak buy point of 41.24.

But MDC took out a Shakeout + 3 entry at 38.78 on April 29. Although volume wasn't great that day, volume kicked in May 2. Shares have rallied higher since.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: MDC , XIN

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