Beazer Homes is a prominent homebuilder in the U.S., currently facing a mix of challenges and opportunities in the housing market. Despite a tough economic environment characterized by rising interest rates and high inflation, Beazer Homes has shown resilience and has delivered impressive returns for its investors.
Recent Performance
Beazer Homes USA has experienced significant fluctuations in its financial performance over the past few years. In the fiscal year 2023, the company reported revenues of $2.21 billion, a 4.8% decline from $2.32 billion in 2022.
This decrease was driven by a reduction in the number of home closings, which fell from 4,756 in 2022 to 4,246 in 2023, despite an increase in the average sales price from $484,100 to $517,800.
The company’s net income also saw a decline, dropping from $220.7 million in 2022 to $158.6 million in 2023. This reduction in profitability was primarily due to inflationary pressures and lower sales volume.
However, Beazer Homes managed to more than double its operating cash flow from $81.1 million to $178.1 million during this period, though adjusted operating cash flow fell from $298.1 million to $204.3 million.
Current Fiscal Year Insights
In the first half of the fiscal year 2024, Beazer Homes reported revenues of $928.4 million, down 6.1% from $988.8 million in the same period the previous year. The number of closings decreased from 1,896 homes to 1,787 homes, and the average selling price dropped slightly from $520,100 to $514,600.
Despite the revenue decline, net income for the period increased modestly from $59 million to $60.9 million.
For the second quarter of 2024, the company reported revenues of $541.5 million, nearly flat compared to $543.9 million in Q2 2023. The average selling price per home rose from $509,900 to $515,900, and net income increased from $34.7 million to $39.2 million.
However, operating cash flow, adjusted operating cash flow, and EBITDA all experienced declines year over year.
Indicators of Improvement
Several key indicators suggest that Beazer Homes is positioned for future growth. Notably, the company’s backlog at the end of Q2 2024 increased to 2,046 homes, up from 1,711 at the end of 2023. Additionally, net new orders for the first half of 2024 were 2,122 homes, significantly higher than the 1,663 homes ordered in the first half of 2023.
For Q2 2024 alone, net new orders rose to 1,299 homes from 1,181 homes in the same period the previous year.
The company’s cancellation rate has also improved, dropping from 20.3% in 2023 to 15% in Q2 2024. In the most recent quarter, the cancellation rate was just 12.2%, compared to 18.6% in Q2 2023.
Valuation Metrics
Beazer Homes USA remains attractively priced based on several valuation metrics. If we annualize the first half of 2024 results, we would expect net profits of approximately $163.7 million, adjusted operating cash flow of $179 million, and EBITDA of $240.9 million.
This positions the company with a price-to-earnings ratio of 5.2, a price-to-operating cash flow ratio of 4.8, and an EV/EBITDA ratio of 7.1.
Compared to its peers, Beazer Homes is undervalued:
- Legacy Housing Corporation (LEGH) trades at a P/E ratio of 10.8, a P/OCF ratio of 44.3, and an EV/EBITDA ratio of 8.1.
- Meritage Homes (MTH) trades at a P/E ratio of 7.7, a P/OCF ratio of 19.5, and an EV/EBITDA ratio of 6.0.
- Century Communities (CCS) trades at a P/E ratio of 8.9, a P/OCF ratio of 74.7, and an EV/EBITDA ratio of 8.8.
- Lennar (LEN) trades at a P/E ratio of 10.7, a P/OCF ratio of 9.4, and an EV/EBITDA ratio of 7.5.
- KB Home (KBH) trades at a P/E ratio of 9.2, a P/OCF ratio of 5.4, and an EV/EBITDA ratio of 8.1.
Conclusion
Beazer Homes USA has demonstrated strong performance amidst a challenging economic environment. The company’s ability to increase its backlog and net new orders, coupled with improving cancellation rates, indicates robust underlying demand.
Despite recent revenue declines, the company’s valuation remains attractive, especially compared to its peers.
DISCLAIMER
You should read and understand this disclaimer in its entirety before joining or viewing the website or email/blog list of SmallCapStocks.com (the “Publisher”). The information (collectively the “Advertisement”) disseminated by email, text or other method by the Publisher including this publication is a paid commercial advertisement and should not be relied upon for making an investment decision or any other purpose. The Publisher is engaged in the business of marketing and advertising the securities of publicly traded companies in exchange for compensation. The track record, gains, upside, and/or losses mentioned in the Advertisement, if any, should not be considered as true or accurate or be the basis for an investment. The Publisher does not verify the accuracy or completeness of any information included in the Advertisement. While the Publisher does not charge for the SMS service, standard carrier message and data rates may apply. To unsubscribe from receiving promotional text messages to your phone sent via an autodialer, using your phone reply to the sender’s phone number with the word STOP or HELP for help.
The Advertisement is not a solicitation or recommendation to buy securities of the advertised company. An offer to buy or sell securities can be made only by a disclosure document that complies with applicable securities laws and only in the states or other jurisdictions in which the security is eligible for sale. The Advertisement is not a disclosure document. The Advertisement is only a favorable snapshot of unverified information about the advertised company. An investor considering purchasing the securities, should always do so only with the assistance of his legal, tax and investment advisors. Investors should review with his or her investment advisor, tax advisor or attorney, if and to the extent available, any information concerning a potential investment at the web sites of the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov; the Financial Industry Regulatory Authority (the "FINRA") at www.FINRA.org, and relevant State Securities Administrator website and the OTC Markets website at www.otcmarkets.com. The Publisher cautions investors to read the SEC advisory to investors concerning Internet Stock Fraud at www.sec.gov/consumer/cyberfr.htm, as well as related information published by the FINRA on how to invest carefully. Investors are responsible for verifying all information in the Advertisement. As an advertiser, we do not verify any information we publish. The Advertisement should not be considered true or complete.
The Publisher does not offer investment advice or analysis, and the Publisher further urges you to consult your own independent tax, business, financial and investment advisors concerning any investment you make in securities particularly those quoted on the OTC Markets. Investing in securities is highly speculative and carries an extremely high degree of risk. You could lose your entire investment if you invest in any company mentioned in the Advertisement. You acknowledge that we are not an investment advisory service, a broker-dealer or an investment adviser and we are not qualified to act as such. You acknowledge that you will consult with your own independent, tax, financial and/or legal advisers regarding any decisions as to any company mentioned here. We have not determined if the Advertisement is accurate, correct or truthful. The Advertisement is compiled from publicly available information, which include, but are not limited to, no cost online research, magazines, newspapers, reports filed with the SEC or information furnished by way of press releases. Because all information relied upon by us in preparing an advertisement about an issuer comes from a public source, it is not reliable, and you should not assume it is accurate or complete.
By your subscription to our profiles, the viewing of this profile and/or use of our website, you have agreed and acknowledged the terms of our full disclaimer and privacy policy which can be viewed at the following link: www.SmallCapStocks.com/Disclaimer and www.SmallCapStocks.com/Privacy-Policy
By accepting the Advertisement, you agree and acknowledge that any hyperlinks to the website of (1) a client company, (2) the party issuing or preparing the information for the company, or (3) other information contained in the Advertisement is provided only for your reference and convenience. The advertiser is not responsible for the accuracy or reliability of these external sites, nor is it responsible for the content, opinions, products or other materials on external sites or information sources. If you use, act upon or make decisions in reliance on information contained in any disseminated report/release or any hyperlink, you do so at your own risk and agree to hold us, our officers, directors, shareholders, affiliates and agents harmless. You acknowledge that you are not relying on the Publisher, and we are not liable for, any actions taken by you based on any information contained in any disseminated email or hyperlink.
Faith is an enthusiastic freelancer and regular contributor to numerous finance blogs, creating valuable pieces to educate individuals on finance and fintech options. As a skilled writer, Faith has created content for diverse industries—if it exists, she’s likely written about it!
