The Best Homebuilding Stock for Investors: NVR, Inc. (NVR)

The most profitable but cheapest valued

With the current trading price of $1,000 per share, NVR is worth nearly $5 billion on the stock market. The market is valuing NVR at nearly a 15.2 EV/EBITDA ratio. The absolute EV multiple seems quite high, but compared to its peers including D.R. Horton, Inc. (NYSE:DHI) and PulteGroup, Inc. (NYSE:PHM), NVR’s valuation doesn’t seem to be high anymore. D.R. Horton is trading at $22.25 per share, with a total market cap of $7.15 billion. The market values D.R. Horton at nearly 25 times EV/EBITDA.

PulteGroup is the biggest company among the three, with a $7.36 billion market cap. It also has the highest valuation at nearly 30.7 times EV/EBITDA. Even with the lowest valuation, NVR seems to be more profitable than D.R. Horton and PulteGroup. NVR’s operating margin is the highest at 9% while the operating margins of D.R. Horton and PulteGroup were only 7% and 5%, respectively. PulteGroup is the most leveraged company with a debt-equity ratio of 1.1 while D.R. Horton employs no debt. NVR’s debt-equity ratio is a moderate 0.4.

Foolish takeaway

Personally, I am quite impressed with NVR as it remained profitable during the residential real estate crisis several years ago. With the lowest valuation, highest operating margin and moderate leverage among peers, NVR could be the best homebuilder for long-term investors to “surf” the U.S. real estate market recovery.

The article The Best Homebuilding Stock for Investors originally appeared on Fool.com and is written by Anh HOANG.

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