NVR Inc. (NVR, Financial) recently experienced a daily loss of -4.34%, despite a 3-month gain of 9.86%. With an Earnings Per Share (EPS) of 468.38, it begs the question: is NVR fairly valued? In this article, we delve into an in-depth valuation analysis of NVR, providing insights for potential investors. Read on to understand more about NVR's financial performance and its intrinsic value.
Introduction to NVR Inc. (NVR, Financial)
NVR Inc. is a renowned homebuilding company based in the United States. The company operates in over 33 metropolitan areas across the east of the Mississippi River. Under the brands Ryan Homes, NVHomes, and Heartland Homes, NVR builds single-family detached homes, townhomes, and condominium buildings. The company's unique avoidance of direct land development activity results in relatively outsized return metrics. NVR also manages a mortgage banking segment and homebuilding operating segments, which include four geographic areas; Mid-Atlantic, North East, Mid-East, and South East.
Comparing the stock price of NVR with its GF Value, which is an estimate of fair value, we can gain insights into the company's value. This comparison will pave the way for a more profound exploration of the company's value, ingeniously integrating financial assessment with essential company details.
Understanding the GF Value of NVR (NVR, Financial)
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. This measure is calculated based on historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Currently, the stock of NVR (NVR, Financial) seems to be fairly valued based on GuruFocus' valuation method. The GF Value estimates the stock's fair value at $6216.16, based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. Given its current price of $6226.96 per share, NVR stock appears to be fairly valued. As a result, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of NVR (NVR, Financial)
Before investing in a company, it's crucial to check its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength. NVR has a cash-to-debt ratio of 2.65, which is better than 76.42% of 106 companies in the Homebuilding & Construction industry. The overall financial strength of NVR is 9 out of 10, indicating strong financial health.
Profitability and Growth of NVR (NVR, Financial)
Investing in profitable companies carries less risk, especially in companies that have consistently demonstrated profitability over the long term. A company with high profit margins offers better performance potential than a company with low profit margins. NVR has been profitable for 10 out of the past 10 years. During the past 12 months, the company had revenues of $10 billion and Earnings Per Share (EPS) of $468.38. Its operating margin of 20.38% is better than 88.07% of 109 companies in the Homebuilding & Construction industry. Overall, GuruFocus ranks NVR's profitability as strong.
One of the most crucial factors in the valuation of a company is its growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of NVR is 17.3%, which ranks better than 73.53% of 102 companies in the Homebuilding & Construction industry. The 3-year average EBITDA growth is 34.6%, which ranks better than 72.63% of 95 companies in the same industry.
ROIC vs WACC of NVR (NVR, Financial)
Another way to assess the profitability of a company is to compare its Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the ROIC should be higher than the WACC. For the past 12 months, NVR's ROIC is 61.97, and its WACC is 8.8.
Conclusion
In summary, the stock of NVR (NVR, Financial) appears to be fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 72.63% of 95 companies in the Homebuilding & Construction industry. To learn more about NVR stock, you can check out its 30-Year Financials here.
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