D.R. Horton, Inc. DHI
Verdict: Sell. Fair value $149 against a price of $146 on 6 Jan 2026, 2% above the price.
In plain words
The case for: Narrow competitive moat provides durability. Market leadership enables pricing power. Industry tailwinds with growing market.
The case against: Intense competitive pressure could compress margins. The Accruals Ratio reached an alarming 0.149 in 2022, far exceeding the 0.10 red flag threshold..... Operating Cash Flow has been extremely erratic, swinging from $0.56B (2022) to $4.30B (2023) and....
Main risks
- Severe margin compression: Net margin has collapsed from 17.5% in 2022 to 10.5% in the TTM period, indicating a sharp decline in profitability.
- Negative incremental return on invested capital: The estimated 3-year ROIIC is extremely negative (-309%), suggesting that capital invested over the last three years has significantly destroyed value.
- Revenue growth has turned negative: After a period of growth, TTM revenue has declined by 6.9% year-over-year, signaling a cyclical downturn or loss of market momentum.
- The Accruals Ratio reached an alarming 0.149 in 2022, far exceeding the 0.10 red flag threshold....
- Operating Cash Flow has been extremely erratic, swinging from $0.56B (2022) to $4.30B (2023) and...
- Intense competitive environment