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Category: Stock Market and NVR
Date: 21 October 2019 Stock Price: $3892.89 |
About NVR
Headquartered in Reston, Virginia, NVR, Inc. is one of America’s leading homebuilders. The Company serves homebuyers in thirty-two metropolitan areas in fourteen states, including, Maryland, New York, North Carolina, Virginia, Ohio, Indiana, Illinois, South Carolina, Pennsylvania, Tennessee, Florida, Delaware, West Virginia and New Jersey, as well as Washington DC.
Homebuilding
The Company’s homebuilding operations sells and constructs homes under three brand names:
Ryan Homes – Founded in 1948 in Pittsburgh, Pennsylvania, to provide housing in the expanding post-war economy, Ryan Homes has constructed more than 400,000 homes. Ryan offers a variety of home-buying options to suit a broad spectrum of consumer needs, whether single-family, townhouse, or garden condominium.
NVHomes - Offering additional architectural details and designer elements tailored to suit the most discriminating of tastes, NVHomes has earned a reputation for quality and value. Established in 1980 in Northern Virginia, NVHomes now operates in Virginia, Maryland, Delaware, and Pennsylvania.
Heartland Homes - Founded in 1984, Heartland Homes is a leading homebuilder in Pittsburgh, Pennsylvania, and markets primarily luxury homes. Supporting the construction operations is our Building Products operation. With manufacturing facilities in Maryland, Pennsylvania, New York, New Jersey, North Carolina, Ohio and Tennessee, this division supplies structural building components that are produced to exacting standards in a controlled environment, and then delivered to the job site to reduce waste and improve efficiency.
Homebuilding
The Company’s homebuilding operations sells and constructs homes under three brand names:
Ryan Homes – Founded in 1948 in Pittsburgh, Pennsylvania, to provide housing in the expanding post-war economy, Ryan Homes has constructed more than 400,000 homes. Ryan offers a variety of home-buying options to suit a broad spectrum of consumer needs, whether single-family, townhouse, or garden condominium.
NVHomes - Offering additional architectural details and designer elements tailored to suit the most discriminating of tastes, NVHomes has earned a reputation for quality and value. Established in 1980 in Northern Virginia, NVHomes now operates in Virginia, Maryland, Delaware, and Pennsylvania.
Heartland Homes - Founded in 1984, Heartland Homes is a leading homebuilder in Pittsburgh, Pennsylvania, and markets primarily luxury homes. Supporting the construction operations is our Building Products operation. With manufacturing facilities in Maryland, Pennsylvania, New York, New Jersey, North Carolina, Ohio and Tennessee, this division supplies structural building components that are produced to exacting standards in a controlled environment, and then delivered to the job site to reduce waste and improve efficiency.
Overview of NVR's latest earnings report
Data below refers to the 3rd quarter data unless specified otherwise:
New ordered units for the 3 months ended September 2019
- Revenues: $1.873 billion (up from $1.809 billion for the same period of the previous year)
- Revenues increased by 3.53% over the last 12 months
- Cost of sales: $1.518 billion (up from $1.472 billion for the same period of the previous year)
- Cost of sales increased by 3.12% over the last 12 months
- Net earnings: $223.787 million (up from $195.816 million for the same period of the previous year)
- Diluted earnings per share: $56.11 (up from $48.28 for the same period of the previous year)
- PE ratio: 17.3
- Diluted weighted-average shares outstanding: 3.988 million (up from 4.056 million for the same period of the previous year)
- Cash and cash equivalents: $1.068 billion
- Cash and cash equivalents per share: $267
- Cash and cash equivalents makes up 6.9% of NVR's market capital
- Cash and cash equivalents makes up 27.7% of NVR's total assets
- Inventories: $1.496 billion
- Inventories makes up 44.6% of NVR's total assets
- Stockholders equity in NVR: $2.371 billion
- Stockholders equity per share: $594.5
- So NVR is trading a 6.55 times its stockholders equity which is outside the expected range of between 2 and 4 which most firms ten to trade at.
New ordered units for the 3 months ended September 2019
- Mid Atlantic: 2 086
- North East: 323
- Mid East: 1 141
- South East: 1 216
- Total: 4 766
NVR's management commentary on the results
RESTON, Va., Oct. 18, 2019 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its third quarter ended September 30, 2019 of $223,787,000, or $56.11 per diluted share
Homebuilding
New orders in the third quarter of 2019 increased by 11% to 4,766 units, when compared to 4,302 units in the third quarter of 2018. The average sales price of new orders in the third quarter of 2019 was $369,200, a decrease of 1% when compared with the third quarter of 2018. Settlements increased in the third quarter of 2019 to 5,124 units, which was 8% higher than the third quarter of 2018. The Company's backlog of homes sold but not settled as of September 30, 2019 decreased on a unit basis by 6% to 9,172 units and decreased on a dollar basis by 7% to $3,402,933,000 when compared to September 30, 2018.
Homebuilding revenues of $1,873,331,000 in the third quarter of 2019 increased 4% compared to the third quarter of 2018. Gross profit margin in the third quarter of 2019 increased to 19.0%, compared to 18.6% in the third quarter of 2018. Income before tax from the homebuilding segment totaled $245,774,000 in the third quarter of 2019, an increase of 10% when compared to the third quarter of 2018.
Mortgage Banking
Mortgage closed loan production in the third quarter of 2019 totaled $1,373,946,000, an increase of 10% when compared to the third quarter of 2018. Income before tax from the mortgage banking segment totaled $21,400,000 in the third quarter of 2019, a decrease of 16% when compared to $25,514,000 in the third quarter of 2018. The decrease in income before tax is primarily due to a 12% decrease in mortgage banking fees, resulting from the timing of loan sales and a decrease in the fair value measurement adjustment.
Homebuilding
New orders in the third quarter of 2019 increased by 11% to 4,766 units, when compared to 4,302 units in the third quarter of 2018. The average sales price of new orders in the third quarter of 2019 was $369,200, a decrease of 1% when compared with the third quarter of 2018. Settlements increased in the third quarter of 2019 to 5,124 units, which was 8% higher than the third quarter of 2018. The Company's backlog of homes sold but not settled as of September 30, 2019 decreased on a unit basis by 6% to 9,172 units and decreased on a dollar basis by 7% to $3,402,933,000 when compared to September 30, 2018.
Homebuilding revenues of $1,873,331,000 in the third quarter of 2019 increased 4% compared to the third quarter of 2018. Gross profit margin in the third quarter of 2019 increased to 19.0%, compared to 18.6% in the third quarter of 2018. Income before tax from the homebuilding segment totaled $245,774,000 in the third quarter of 2019, an increase of 10% when compared to the third quarter of 2018.
Mortgage Banking
Mortgage closed loan production in the third quarter of 2019 totaled $1,373,946,000, an increase of 10% when compared to the third quarter of 2018. Income before tax from the mortgage banking segment totaled $21,400,000 in the third quarter of 2019, a decrease of 16% when compared to $25,514,000 in the third quarter of 2018. The decrease in income before tax is primarily due to a 12% decrease in mortgage banking fees, resulting from the timing of loan sales and a decrease in the fair value measurement adjustment.
NVR (NYSE: NVR) stock price history
The image below, obtained from Google, shows the stock price history of NVR over the last 5 years. And it's been a very good time for NVR stockholders. 5 years ago the stock was trading at around $1204 a stock and its currently trading at $3892.80 a stock. That's excellent return of 223% provided to NVR stockholders over the last 5 years.
The stock of NVR s trading at a lot closer to its 52 week high of $3894.67 than it is to its 52 week low of $2040.71, which to us is a clear indication that the short term sentiment and momentum towards NVR's stock is very positive.
The stock of NVR s trading at a lot closer to its 52 week high of $3894.67 than it is to its 52 week low of $2040.71, which to us is a clear indication that the short term sentiment and momentum towards NVR's stock is very positive.
Recent coverage of NVR
The extract below covers the latest news regarding NVR joining the S&P 500 as obtained from TheStreet.com
NEW YORK, Sept. 20, 2019 /PRNewswire/ -- S&P Dow Jones Indices will make the following changes to the S&P 500, S&P MidCap 400, and S&P SmallCap 600 effective prior to the open of trading on Thursday, September 26:
NEW YORK, Sept. 20, 2019 /PRNewswire/ -- S&P Dow Jones Indices will make the following changes to the S&P 500, S&P MidCap 400, and S&P SmallCap 600 effective prior to the open of trading on Thursday, September 26:
- NVR Inc. (NYSE: NVR) will replace Jefferies Financial Group Inc. (NYSE: JEF) in the S&P 500, and Jefferies Financial Group will replace NVR in the S&P MidCap 400. Jefferies Financial Group is spinning off its holdings in Spectrum Brands Holdings Inc. (NYSE: SPB) and post spin-off, Jefferies Financial Group will be more representative of the mid-cap market space. Spectrum Brand Holdings will not be added to the S&P Composite 1500 at this time.
NVR Inc. (NYSE: NVR) latest stock valuation
So based on NVR Inc (NYSE; NVR) latest earnings report what do we value the group's stock at? Based on their earnings report our valuation models provides a target (full value) price for the stock of NVR Inc at $3 584. We therefore believe that the stock of NVR is overvalued
We usually recommend that long term or fundamental investors enter into a stock at least 10% below our target (full value) price, which in this case is $3 584, We therefore see a good entry point into the stock of NVR at $3 225.60. Since the stock of NVR is trading well above our suggested entry point we would not advise investors to buy into the stock of NVR at this point in time. We expect the stock of NVR to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We usually recommend that long term or fundamental investors enter into a stock at least 10% below our target (full value) price, which in this case is $3 584, We therefore see a good entry point into the stock of NVR at $3 225.60. Since the stock of NVR is trading well above our suggested entry point we would not advise investors to buy into the stock of NVR at this point in time. We expect the stock of NVR to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of NVR Inc
The 4th quarter 2019 earnings report of NVR Inc is expected to be released late January 2020.