DHI by liwenting

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									DR Horton
  (DHI)
              Who the hell is DR Horton?

D.R. Horton, Inc. operates as a homebuilding company in the United States. The
company operates in two segments, Homebuilding and Financial Services. The
Homebuilding segment engages in the acquisition and development of land for
residential purposes, and construction and sale of residential homes. This segment
builds traditional single-family detached homes and attached homes, such as town
homes, duplexes, triplexes, and condominiums. It markets and sells its homes
through commissioned employees and independent real estate brokers. The
company constructs and sells homes in 27 states and 83 metropolitan markets in
the United States under the name D.R. Horton, America's Builder'. D.R. Horton
markets and sells homes through commissioned employees and independent real
estate brokers. The Financial Services segment offers mortgage banking and title
agency services to homebuyers. This segment also provides title insurance
policies, examination, and closing services primarily to purchasers of homes. It
originates, packages, and sells mortgage loans and their servicing rights to third-
party investors, after origination on a non-recourse or limited recourse basis. The
company was founded in 1978 and is based in Fort Worth, Texas.
                    Key Metrics
•   Price - 13.41
•   P/E – N/A (Negative Earnings)
•   EPS - -2.27
•   Dividend – 4.5%
•   52 Week Range - 10.15 – 31.13
•    Market Cap – 4.22 Billion
•   Beta – 2.17
•   Inst. Owned – 94%
•   Price/Book - 0.76
•   Total Debt – 4.38 Billion
               Key Metrics Continued

                            Quarterly    Annual
                            (Sep '07)    (2007)


Net Profit Margin             -1.58%    -6.31%

Operating Margin              -3.16%    -8.42%

EBITD Margin                        -   -7.64%

Return on Average Assets      -1.67%    -5.39%

Return on Average Equity      -3.57%    -11.84%

Employees                      6,231          -
         Income Statement & Balance Sheet

                      Quarterly     Annual     22% dec. in     Annual
                      (Sep '07)     (2007)     sales vol. &    (2006)
Income Statement                               5% dec in
                                               price
Total Revenue         3,172.40    11,296.50              15,051.30
Gross Profit            265.90       811.40                   3,633.00
Operating Income        -100.20     -951.20                   1,987.10

Net Income               -50.10     -712.50                   1,233.30
                                    1.3 Bil. In Inventory Impairment
                                    and Land Option Write-offs
Balance Sheet
Total Assets          11,570.40   11,570.40              14,863.20
Total Liabilities     5,983.50    5,983.50                    8,410.30
Total Equity          5,586.90    5,586.90                    6,452.90
DIRECT COMPETITOR
COMPARISON - 2006


                          DHI          CTX          LEN          PHM          Industry




Market Cap:                  4.22B        3.02B        2.71B       2.62B          340.33M
Employ-ees:                  6,231       11,418       12,605      12,400            1.02K

Qtrly Rev Growth (yoy):   -35.00%      -21.10%      -44.00%      -30.60%            0.00%
Revenue (ttm):              11.30B      10.55B       12.28B       10.75B            1.28B
Gross Margin (ttm):        17.72%       -5.63%       14.05%       0.26%            17.03%
EBITDA (ttm):             924.90M      -702.76M      48.37M      117.45M           84.19M

Oper Margins (ttm):         7.62%       -7.19%       -0.01%       0.26%            -0.92%
Net Income (ttm):         -712.50M       -1.04B     -885.04M      -1.39B           -44.46M
EPS (ttm):                  -2.268       -6.616       -5.620      -5.517             -1.05
P/E (ttm):                      N/A          N/A          N/A          N/A            8.04
PEG (5 yr expected):            N/A          N/A          N/A          N/A            0.89
P/S (ttm):                      0.37         0.29         0.22         0.24           0.25
                                Positives
•   DR Horton is the largest homebuilder in the U.S., meaning they should be
    able to weather the current market conditions, and possibly acquire smaller
    companies that can’t survive.
•   Compared to its competitors DR Horton is performing the best in terms of
    gross and operating margins. Also, number of employees as a % of
    revenue is significantly lower than others. These lower personnel costs will
    help against the downturn.
•   Government is starting and should continue to bring relief to companies that
    have been affected by the housing market.
•   Price is near its 52 week low.
•   Price to Book Value is below 1
                               Negatives
•   Many risks to this stock, hence a beta of 2.17
•   DR Horton has a lot of debt, meaning much of there cash flow is going to be
    used to pay off loans, and they might have issues with getting capital in the
    future.
•   Housing demand and consumer confidence have continued to fall, thus
    lowering the price of new homes, and making them more difficult to sell.
•   The record amount of foreclosures continues to put more homes out on the
    market, thus driving down the price of real estate.
•   There is no clear indicators of when the housing market will rebound.
                          Summary

The housing market is eventually going to rebound, the question is
when. While this might not be the right time to buy a homebuilding
stock, it is a good long term investment, and it’s important that we keep
an eye on this industry. Remember that while expectations are very
bad, this is already incorporated into the stock price, giving it over a
60% discount off its 52 week high. While it is not the best strategy to
find the bottoms, if we look to hold onto this over the next 5 years, there
is much more upside than downside in this stock.

								
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