Aided by positive sentiments in the homebuilding sector, shares
of
M.D.C. Holdings Inc.
(
MDC
) reached a new 52-week high of $33.29 per share on June 29, before
closing at $32.67 per share. The optimism came from the National
Association of Realtors' pending home sales index, which jumped
5.9% to 101.1 in May and increased 13.3% from 89.2 in the year-ago
period.
This residential construction stock has been gradually gaining
traction since reporting positive first-quarter 2012 results, which
included a 122.2% surprise. Shares of this Zacks #1 Rank (Strong
Buy) stock have grown about 83.8% year-to-date.
First-Quarter 2012 Signals Growth
On May 3, M.D.C. Holdings reported fiscal first-quarter 2012
earnings per share of 4 cents, compared with the Zacks Consensus
Estimate for a loss of 18 cents. The result also compared favorably
with the prior-year quarter's loss of 43 cents. The improvement in
the first quarter was mainly attributed to a 13% rise in home sale
revenues, a 28% decline in homebuilding selling, general and
administrative expenses, and a 90.8% dip in interest expense.
Total revenue of $186.3 million comfortably surpassed the Zacks
Consensus Estimate of $169 million, and grew 13.9% year over year.
New orders increased 51% to $1,063 homes. Order backlog at the end
of the first quarter was 1,487 homes with an estimated sales value
of $477 million, the highest since the second-quarter 2008.
M.D.C. Holdings has made significant progress over the last several
quarters in implementing various initiatives to streamline its
business, improve sales, reduce overhead costs and cut capital
expenditures. Along with a strong balance sheet and liquidity
position, these factors should help the company reach its
profitability goal for the full-year 2012.
Estimates on the Upside
In the past 30 days, the Zacks Consensus Estimate for 2012 rose
2.3% to 45 cents per share, reflecting year-over-year growth of
135.6% on a reported 2011 loss per share of $1.27. The Zacks
Consensus Estimate for 2013 is up 4.0% to $1.05 per share,
depicting a 131.5% year-over-year rise.
Valuation Compelling
M.D.C. Holdings currently trades at a forward P/E of 72.2x,
reflecting a 25.8% premium to the peer group average of 57.4x.
Simultaneously, on a price to sales basis, shares are trading at a
premium at 1.81x compared with 0.88x for the peer group. Given the
company's compelling fundamentals, the premium valuation is
justified and well supported by its long-term estimated EPS growth
rate of 15%. However, on a price-to-book basis, shares trade at
1.80x, reflecting a discount of 1.6%.
Charts Show Upward Trend
Over the last six months, shares of M.D.C. Holdings have been
trending upward with slight pull backs from time to time, and is
now trading close to its 52-week high. In fact, the stock has been
consistently trading above its 200-day moving average since
February 2, 2012. It has also remained above the 50-day moving
average since June 14, 2012.
Volume is fairly strong, averaging roughly 1,193K daily. M.D.C.
Holdings, which competes with KB Home (
KBH
) and DR Horton Inc. (
DHI
), has outperformed the S&P 500 over the last six months. The
year-to-date return for the stock is roughly 83.8% compared with
the S&P 500's return of 6.7%.
Headquartered in Denver, Colorado, M.D.C. Holdings and its
subsidiaries engage in homebuilding and financial services
businesses in the U.S. The company's homebuilding division has been
designing and building new homes under the name "Richmond American
Homes" for more than 35 years. The company's financial services
business engages in providing mortgage financing, insurance and
title services, primarily for Richmond American homebuyers, through
HomeAmerican Mortgage Corporation, American Home Insurance Agency
Inc. and American Home Title & Escrow Company, respectively.
The company, founded in 1972, has a current market cap of $1.57
billion.
MDC HLDGS (MDC): Free Stock Analysis Report
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