PulteGroup (PHM, Financial) currently has 134,000 owned lots, a gross debt-to-cap ratio of 28%, a strategic process for capital investments and $1.2 billion of considerable cash on the balance sheet which enables it to enhance the key shareholders returns.
The company is focused on implementing a value creation strategy for delivering improved margins, inventory turns and utilizing overheads. PulteGroup has a solid balance sheet with over $1 billion of cash and investors are witnessing its operations to be growing continuously and profitably having improved capital efficiency.
Investing for growth
PulteGroup targets on investing into the business for accelerating enhanced returns on the invested capital. It has expanded its quarterly dividend for improving the consolidated returns of its investors and lastly, moving ahead, PulteGroup aims to return accessible surplus capital to investors systematically and continuously by executing share repurchases.
It has improved its total returns on invested capital, much above its cost and continues to expand its land investments.
PulteGroup is focused on returning sizeable systematic funds to its shareholders through planned share repurchases and strategic dividends. Hence, successfully executing upon this strategy, PulteGroup declared a 60% increase in its dividend and worth $750 million development of its share repurchase authorization.
Going forward, PulteGroup expects a solid demand and sustainable growth propelled by the significant improvement in the absorption paces for the third quarter.
PulteGroup witnessed significant demand during the third quarter even in such tough market conditions. On the East Coast, PulteGroup is continuously witnessing solid demand in the southern markets especially in the Carolinas and Florida. Overall, the demand in the Midwest remained robust, with continued progress in Cleveland, Indianapolis and Michigan.
Texas performed significantly great during the quarter, but there are solid indicators of market weakness, going forward. The Phoenix, Las Vegas, Southern California and the West grew significantly during the quarter. Northern California remained somewhat volatile over the period. Demand in October largely followed a seasonal pattern supported by the local market dynamics.
Conclusion
The trailing P/E and forward P/E ratios of 17.30 and 15.17 show that the cost-cutting efforts of the company, coupled with improved operations, will lead to long-term growth. Also, it is better than the industry’s average P/E of 17.45, going forward. The PEG ratio of 2.69, above 1 signifies slower growth compared to solid industry’s average of 0.88. The profit margin of 8.44% is satisfactory. The revenue per share and diluted EPS of 15.00 and 1.25 respectively signifies nominal investor earnings.
However, the quarterly revenue growth and quarterly earnings growth of 0.80% and -93.80% respectively is poor and suggests continued decline in shareholder earnings. Still, the current ratio of 3.19 is healthy and suggests the robustness of the company’s balance sheet. Finally, the investors are advised to invest into PulteGroup, Inc. looking at the solid long-term growth prospects indicated by the CAGR for the next 5 years per annum of 7.48% lower than the industry’s average of 18.59% and expect satisfactory and comparable returns in a long run.
