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Homebuilder MDC Holdings Back To Building Profit

Posted
5/22/2013 5:53:00 PM
By: Investor's Business Daily
Referenced Stocks:MDC;XIN

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.