Is PulteGroup, Inc. (PHM) a Bargain Here?

Toll Brothers Inc (NYSE:TOL) is also expensive, but at least the price is justifiable considering a profit margin of 23.60%. Another plus for Toll Brothers Inc (NYSE:TOL) is that it’s the only company in this group that sports a debt-to-equity ratio lower than the industry average — 0.78. Furthermore, PulteGroup, Inc. (NYSE:PHM) and Toll Brothers Inc (NYSE:TOL) have been better long-term performers than KB Home and Lennar Corporation (NYSE:LEN).

Lennar Corporation (NYSE:LEN) is fairly valued, and it’s relatively efficient. Its debt-to-equity ratio of 1.25 is only slightly higher than the industry average, and it currently yields 0.40%.

All of the above numbers matter, but investors really want to know about the top and bottom lines. Annual revenue for KB Home has consistently declined over the past four years. Earnings have rebounded, which is a big positive, but earnings don’t tell the whole story as they can easily be manipulated.

Toll Brothers relies more on luxury properties, which has led to solid growth. Revenue increased in 2012, and earnings have been in the black for two consecutive years.

Conclusion

PulteGroup, Inc. (NYSE:PHM) may look like a bargain, but its fundamentals could easily change based on industry trends.  So we’re at an inflection point because the industry is likely to perform well in the near future.  And that should yield stock appreciation on an industry wide basis.  On the other hand, that rebound may not be sustainable because of a general lack of first-time home buyers.  So an investment in PulteGroup may very well be a bet on the industry.

The article Is PulteGroup a Bargain Here? originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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