Yahoo Finance Is There Now An Opportunity In Taylor Morrison Home Corporation (NYSE:TMHC)?
Taylor Morrison Home Corporation (NYSE:TMHC), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Taylor Morrison Home’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Taylor Morrison Home
What Is Taylor Morrison Home Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Taylor Morrison Home’s ratio of 3.13x is trading slightly below its industry peers’ ratio of 6.26x, which means if you buy Taylor Morrison Home today, you’d be paying a reasonable price for it. And if you believe Taylor Morrison Home should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Taylor Morrison Home’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Taylor Morrison Home generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Taylor Morrison Home, at least in the near future.
What This Means For You
Are you a shareholder? Currently, TMHC appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on TMHC, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on TMHC for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on TMHC should the price fluctuate below the industry PE ratio.
If you'd like to know more about Taylor Morrison Home as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Taylor Morrison Home (of which 1 makes us a bit uncomfortable!) you should know about.
If you are no longer interested in Taylor Morrison Home, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
